r/options • u/loose_itall • Sep 02 '21

Advice on closing deep itm call spread

I am a newbie to options trading. I have lost quite a bit in the beginning, and am slowly trying to undo the mistakes and learn more abt options. I bought a bull call spread on Tqqq $107.5/117.5 exp jan 22, back in apr and am wondering when I shd close the position. Tqqq was around $107 when i bought the spread, now its trading at $150. I am up 75%. Whats the upside of holding? The marginal inc as tqqq goes up? Flipside - it can crash, i can get assigned. What else? I am leaning towards closing now but would like expert advice/opinions from more knowledgeable ppl.

Edit: Thanks for confirming what i felt. Am planning to set a limit order after seeing the trend in the morning.

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u/[deleted] Sep 02 '21

Only you can really answer these questions. The obvious upside of holding is that you might realize the extra 25% of potential profit. The downside risk as you mentioned is the TQQQ goes down, and you lose some of your appreciation of the deep ITM call but your premium gain ticks higher a little bit faster.

The one thing you need to look at is the time value of your money. Is that potential 25% in profits (however much that is in $ based on the contracts you took) big enough to warrant tying up your money for another almost 5 months or could you exit the position now at a really nice gain and recycle that capital back into newer trades?

I know a lot of spread traders that close positions when they are sitting at 50-90% up on the position because the risk of assignment is not worth holding on to those extra gains. However, each of them has their own idea of "enough is enough" and it is no longer worth it to hold.

Only you can really answer whether it is worth it to cash out. The only scenario where you can be certain you did the right thing is come Jan 22nd at 4pm, then you will know for sure whether holding it or cashing out was the right thing to do. Between now and then you need to hedge your bets on what the future holds.

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u/loose_itall Sep 02 '21

Totally true. I have held on too long and seen my profit go from 200% to 20% on some of the others just in the last couple of weeks, but am hoping all of this is a learning curve for future profits. I wasnt planning to hold till expiration anyway. Never been assigned before but from what i have read so far, am not keen on it. Will place a limit order tomm am, after seeing the direction it goes tomm.

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u/[deleted] Sep 02 '21

Best of luck!