In order to remove the greed from trading I do the following to make sure I take profit when profit is there.
After buy order for my contracts are filled I set the order to sell my contracts based on the conditional order taking into account the three targets and number of contracts I have purchased.
The conditional order for Calls contract is set as follows:
“Sell XYZ calls contracts at market when XZY stock price is equal to or greater than certain price”.
In case of Puts contracts I set my conditional order as follows:
“Sell XYZ puts contracts at market when XYZ stock price is equal to or less than XYZ stock price”.
Setting the conditional order eliminates the need to calculate target bid prices as well as greed factor from trading.
Some points to remember:
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Order is set at “market” not at limit
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Make sure greater than or equal is set for Calls and
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Less than or equal is set for Puts
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Test the Conditional order for one contract first and when it works fine and you feel comfortable then set for actual contracts you have.
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