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Managing Winners: Scalping Options

When the anchor holds and we begin to see positive resolution, we must begin to focus on capitalizing on gains while still protecting the downside. Techniques for managing winners are the same regardless of the strategy, so information here is applicable across all strategies and time horizons.

Let's explore some common practices. Additionally, we'll provide tips to ensure you achieve optimal fills.

Taking Profits at Target Levels

Identifying target levels is fundamental to managing winners. These levels can be determined through various means such as Gamma, market structure/trendlines, VWAP, recent highs or lows, psychological round numbers, etc. When the price reaches these predetermined targets, it's a signal to scale out or to close the position.

In the event that the price surpasses your target and you opt to maintain your position, you can adjust your anchor point to the previous target. The trade remains valid as long as the price holds this level.

Taking Profits at Premium Levels

Another viable strategy involves profit-taking based on premium. When a trade yields returns, such as reaching 25%, 50% or 100% ROI it presents a compelling opportunity to consider booking profits.

Scaling Out

Scaling out refers to the practice of gradually closing parts of a winning position as it moves in your favor. This technique not only secures profits along the way but also allows the remaining portion of the position to potentially capture further gains. It's a method that balances locking in profits, reducing risk while maintaining the potential for more gains.

To further protect gains, one could adjust the stop. For example, if you bought an option for $50 sold half at $75, you can adjust the stop to $25. This is your breakeven point, and eliminates the potential for loss. Worse case scenario flat trade.

Trailing Stops

Utilizing trailing stops can also help capture additional gains if the price continues to trend favorably. Trailing stops are adjusted as the price moves in the desired direction, allowing for potential further profits while protecting against a reversal.

Upticks and Downticks

One common technique to improve fill prices is executing positions on the counter tick.

This technique involves entering long positions on downticks and exiting for profits on upticks. Similarly, short positions are entered on upticks and profits are taken on downticks.

Uptick refers to a price movement or transaction that occurs at a higher price compared to the previous price or transaction. Downtick refers to a price movement or transaction that occurs at a lower price compared to the previous price or transaction.


"velocity" refers to the speed at which the price of an asset moves.

As price velocity increases, options pricing tends to move quickly. This change in premium is a result of heightened uncertainty and increased perceived risk in the market, making options more valuable due to their potential for greater gains if momentum continues. Therefore, when observing relatively large candles, a common practice in scalping is to close or enter into the spike.

Monitoring for Position Evolution

Successful scalp trades can evolve into longer-term positions, holding for hours opposed to minutes. Recognizing the shift from a quick scalp to a longer term trade requires monitoring the evolving market dynamics. This shift might be indicated by sustained momentum, break of structure, increasing volume, a catalyst, etc.

While every scenario is unique, deploying these techniques and best practices can serve to mitigate losses and maximize gains.


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