Stock Options Expiration Week

It is options expiration week, which means that if you have any July contracts left in your portfolio it is a good time to take a look at them and figure out what you want to do with them.

In my account, I began adjusting positions last week and will continue to do so this week. Before the market broke out, I was able to buy back my short SPX call options for a .10 debit. The long contracts were left in place, so when the SPX broke out to the upside I was able to sell the longs for a .10 credit. The put contracts will likely expire worthless as they are now far out-of-the-money. Alternatively, the short contracts could be bought cheaply and the risks of expiration avoided.

It rarely makes sense to expose your portfolio to risky position simply to squeeze a little extra from the trade. Consider a 5 point credit spread that you could close for a .10 debit. Are you willing to risk a $490 loss to earn an extra $10?

I am not suggesting that you close all your positions today. What I do suggest is that you look at expiration week from the point of view of a risk manager, rather than focusing upon the extra bit of profit you might collect.

Whether you plan to close your July contracts or let them expire, keep an eye on things this week and don't forget to mind your risk. Often, options traders leave themselves exposed to significant risks simply because they don't want to pay a nickel or dime to close a position.

Trade well!

Christopher Smith
TheOptionClub.com