How to Get a Second Bite on a Trade

[Trading With Larry Benedict]( How to Get a Second Bite on a Trade By Larry Benedict, editor, Trading With Larry Benedict Sometimes when you open an option position, things don’t quite work out as planned. The move you hoped for doesn’t pan out within your time frame… or the reason you entered the trade is no longer there. It can leave you stuck in no man’s land. Do you stay the course in the hope things turn around? Or do you cut your losses and move onto the next trade? One of the great things about options is that you can adjust them mid-trade. You just need a clear reason to do it. Recommended Link [Watch SHOCKING Footage of AI Facility with Ties to Elon Musk]( [image]( I recently traveled more than 3,000 miles and [shot this video outside what could end up being Elon Musk’s biggest secret.]( Most people don’t know about this facility, but it could be the most important AI project in the world. What’s happening inside these walls is so important that our government has declared it a matter of national security. It will definitely impact you and your family… And it could make a lot of people rich in the process. [Click here to see the details.]( -- Cut or Roll Say, for example, that you buy put options on the S&P 500. (Put options increase in value when the underlying asset falls). You believe that the index has peaked and is vulnerable to a correction. But as each day passes, the S&P 500 continues to climb. If you believe that you’ve simply got it wrong, the best path is often to quit the trade as soon as you can. Your put option will decrease in value as the S&P 500 climbs. And the other major factor working against you is time decay. The closer you get to the option’s expiration, the quicker time decay will erode its value. But if you’re convinced you’re right and want to stick with the trade, you can instead choose to roll the option. A roll is when you simultaneously close your existing option position and open a new one. So, in our S&P 500 example, you would sell the put option you initially bought and buy a new put option. This new position will have a different expiry or strike price – and often a combination of the two. You can roll your position up or down (different strike prices) and/or extend it further out (duration) to match your revised expectations for the trade. But you must still have conviction in the trade’s rationale and make sure you’re not doubling down on a loser. So let’s check out how it works… Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. A Roll in Action After the S&P 500 gapped higher in the middle of November, it struggled to make new highs over the following days. If you believed that the S&P 500 had rallied too quickly and buying momentum was drying up, you could take out a short position. Let’s say you bought a put option with a 4,500 strike price with one month until expiry. (Note that this is not a trade recommendation.) You believed that a reversal could soon see the S&P 500 “fill in the gap” and generate a nice, quick profit: S&P 500 Index [chart] Source: eSignal But no sooner than you entered the position, the S&P 500 regathered momentum and started climbing. And with just two weeks remaining until your option expires, there’s a good chance it will expire worthless. But if you believed that the S&P 500 was even further extended and even more vulnerable to a pullback, you could choose to roll your position. Essentially, you think your rationale was right, but your timing was wrong. So you would sell your 4,500 put option that has now only two weeks until expiry. And you would buy a put option with a higher strike price such as 4,580 and another full month until expiry to give the trade enough time to work out. If you got this new trade right, then it would have the potential to cover the losses from the initial trade and result in a net gain overall. The other thing to note when doing a roll is that time decay isn’t linear. It accelerates the closer you get to expiry. The value of your existing option will drop more quickly as you approach expiry, making it more expensive to do the roll. So if you are determined to hold onto a trade, then you’ll want to roll your trade before time eats up too much of your existing option’s value. Regards, Larry Benedict Editor, Trading With Larry Benedict IN CASE YOU MISSED IT… [Flip Today’s Crazy Market to Your Gain]( 2022 was a bloodbath for the stock market. But those following Market Wizard Larry Benedict saw gains like: - 31% in 24 hours - 106% in three days - 79% in three days - 61% in three days - 120% in 11 days - And more… And these gains have come whether stocks go up or down! What’s Larry’s secret? In this short interview, he reveals his unique method – including the name of the ticker symbol you need to get started. [Click here for a private viewing.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2023 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](