Education · Lessons from the Byte
Your profit target is reached. Now what?
In one of Ian's earlier lessons, a Moderna call alert prompted a member to ask whether to close a position with a reported potential gain of $3,680.
Moderna was approaching its inclusion in the S&P 500. The stock had already risen ahead of the event, and several catalysts supported the original alert. Even so, Ian agreed with the member's wish to take the gain.
Moderna continued higher before reversing sharply, finishing the session down $6.26 at $307.33. The member's actual exit price wasn't reported.
A later high can make an earlier exit look disappointing. But at the time of the decision, the choice was between an available gain and the possibility of more.
A target reached early can still satisfy the original trading plan.
Ian's exit-strategy teaching emphasises setting profit targets or ranges before entering a position, when emotions are less likely to influence the decision.
Once a target is reached, holding for more means reconsidering that plan. A continuing trend or new information may justify doing so. But is the decision based on what has changed in the trade, or simply the desire for a larger gain?
This lesson first appeared in Weekly Options Bytes, our free email from Ian Harvey’s options research desk.
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