Most traders are told to let winners run and cut losers quickly. If you sell premium, that advice will cost you money. Jim Schultz breaks down why the rules are completely different for premium sellers and what you should be doing instead.
When a winning short premium trade builds up profit, your risk is actually increasing because you are now protecting those gains on top of your original position. That is why taking profits at 50% of max is so powerful. With losing trades, cutting them early when a stock is still out of the money means you are buying back at a worse price on both delta and volatility at the same time. Giving the trade time to work is not reckless. It is the edge.
The key to all of it is starting small. Size at three to seven percent per undefined risk position and you keep the flexibility to manage any situation with a clear head.
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