Go to http://ExpertOptionTrading.com/videos for more free videos on Options Greeks Okay. What I would like to do is show you how we close out positions. This is one of the things that is so important. It's important for you to understand the principles of what we are trying to do, rather than learning techniques, where you just do it like a robot. You don't want to be a robot. You really want to be able to take a look at these techniques, and do them as a principle. In other words, let's take our SPY position, which is an iron condor. We are very close to our maximum profit on this. If we held it to expiration, which is only a few days away, we would make $500. Price is always a risk in the last week of expiration, because it can move either way. Yes, we do have a lot of room to move, but if we get large price movements, it is going to hurt one side of our position. Think about this for a second. I think that we will probably be up on the markets this week. Whether we're up or down, it doesn't really matter. Let's say that we think that there is more upside potential to the market. What is the only thing holding this position back? It's our short call. Our current position, we were long the 145 calls, and short the 143 calls. When we sold the 143 calls, we sold them at 92 cents. If we take off this little lock box here, and change it to green, you can see that the current price is 8 cents. We made a profit, because we were short those calls, from 92 cents, down to 8 cents. We have made 84 cents in profit. If we believe that the market is going to go up, why not take those calls out? Those short calls will work against us if the market continues to go up. What does that to our position? What that does to our position is give us a free call. The 143 calls that we were short, we took out. We still have the long 145 calls, and they are only trading for 2 cents right now. We're not going to make very much money on that if we just take them out, are we? No. If we leave them there, look what it does to our profit picture. If we continue to stay where we are, or even if we go down quite a bit, we still have another $55 in profit that we can grab in this position. However, look at our white line here. That's what would happen if we went up 500-600 points on the Dow, all of a sudden. This 145 call here, that's only trading for 2 cents, is basically a free call. We already paid for it, by our short position. We made a profit on that. What we're doing is just taking a long call here - our remaining position - and just keeping it, because it's only worth 2 cents. Because we are long that call, it doesn't really hurt. It can't go much farther down, because it's only 2 cents. We might as well keep the position. You don't have to close this position out. Right now, the mark, as you can see, is just 2 cents. If it goes up, we just continue to make more money. If it goes down, we've only lost 2 cents, so that's no big deal. Basically, it gives us a long call. What we want to do is, when we pare down, when we get toward expiration week - what we would like to do is be able to sell out our short options. Those are the ones that could go against us. With the long options, it depends on what the market conditions are. For more videos on Options Greeks be sure to check out our channel: http://www.youtube.com/user/howtotradeoptions To learn more about the Expert Option Trading course go to: http://ExpertOptionTrading.com Additional Tags ================ vertical spreads, options greeks, what is options trading, option volatility, option spreads, options volatility, how to trade in options, option strategies, index options, equity options, virtual trading, options spreads, virtual options trading, options trading tutorial, option trading strategy, options trading course, how to trade stock options, options trading systems, options training, learning options, learn to trade options, option trading tutorial, options trading strategy, option trading course, option trading systems, options trading basics, option trading basics, option trading system, options trading courses, options trading training, trade options, what is a stock option, options strategies
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Duration: 7m 10s
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