Our modus operandi is to buy or sell options that come as close to our investment horizon as possible. But sometimes, it makes sense to close a trade before expiration to either lock in a profit or minimize a loss.
We have three trade suggestions that should be closed out. While these trades come due later this month, we think the risk of giving profit back outweighs the potential gains that might be had by waiting to expiration.
We suggested buying a risk reversal in Range Resources as we were looking for a big rally in nat gas prices. However, we had three weeks of warm weather, which relieved the anticipated shortage. That trade is in the black, and we think the best course of action is to close the trade and look for an opportunity to buy the dip and get backs in the situation.
In September, we discussed a crash trade structure in SPY as a hedging strategy. We like the ratio put spread structure because if were are wrong like we were in this case, one can still make a buck if they structure the trade to generate a credit. If SPY rallies as it did in this case, the time value disappears, and the trade turns profitable.
Finally, we were looking for silver to rally as the inflation situation worsens and the solar panel business is doing nicely. That trade did not work, so we suggest closing it out and recovering whatever you can.
