Happy June, traders…
One of the trickiest parts of trading options is determining the right time to exit a position.
Even if you’re up big on an options trade, the market can turn against you in a flash, and all those unrealized gains can vanish…
At the same time, holding out for too long might mean missing the chance to lock in a solid win.
This is something I hear about a lot from my students. The volatility of options can be intimidating, and the stories of traders losing big by waiting too long are all too common.
I’ve been there myself, watching gains slip away because I thought, “Maybe it’ll go just a little higher.”
This is why you must have a clear plan for getting out of your trades.
You’ve gotta protect yourself from losses and ensure you’re ready to grab those golden opportunities when they show up.
For me, there’s one approach that has made a huge difference in how I handle exits: scaling out of my trades in batches.
It’s a simple concept, but it’s improved my trading performance exponentially.
Let me show you four reasons why this method works so well for me (and why I think it can help you too)…
Reason #1: It Protects Your Gains
Let’s start with the obvious…
Scaling out helps to protect the money you’ve already earned.
When I scale out of a trade, I guarantee that some of my profits are locked in. That way, I don’t lose everything if the market pulls the rug out from under me.
Options are extremely volatile. One minute, your trade can be up 50%, and the next, it’s down the same amount.
By selling off in chunks, you spread out the risk. Sure, you might leave a little money on the table if the price keeps climbing — but you won’t lose your hard-earned gains.
Trust me, the peace of mind is worth it…
Reason #2: It Feels Good to Take Profits
There’s a good reason I often listen to a certain song by the Steve Miller Band while I’m trading…
I can’t overstate how good it feels to take profits.
There’s something so satisfying about booking a win, even a small one. And in this business, you need to take all the wins you can, when you can.
Newer traders often make the mistake of “holding and hoping,” thinking their trade will hit an unrealistic number, only to see their gains vanish when the market turns against them.
This is why I scale out when I’m up. I can celebrate a win, no matter what happens next.
If the trade keeps going in my favor, I still have skin in the game. And if it doesn’t, I’ve already locked in valuable profits.
Every small win adds up over time. And the more wins you collect, the easier it is to handle those inevitable losses.
Reason #3: It Gives You Room to Adjust
Life and markets have one major thing in common … they’re both wildly unpredictable.
No matter how much research you’ve done or how confident you feel, the unexpected can always happen.
Scaling out gives you the flexibility to respond in the moment.
Example: Let’s say you’re in call options with two weeks left on them. You have confidence you’ll reach your strike price by expiration, but the underlying stock is up big today. You don’t want to exit the position entirely (because you still think it will hit the strike price), but you want to take advantage of the gains on the day. This is a perfect time to scale out of a portion of the trade.
On the flip side, if the trade turns against you, you’ve already secured some profit and limited your risk. You’re not forced to make a zero-sum decision.
Reason #4: It Keeps Your Emotions in Check
Trading isn’t just about patterns, charts, and numbers — it’s about managing your emotions.
The ups and downs of the market can mess with your head. And if you’re not careful, that can lead to bad decisions (and avoidable losses).
Scaling out helps me stay confident in a trade…
Instead of riding the emotional highs and lows of an all-or-nothing bet, scaling helps me stay cool, calm, and collected.
Taking profits in smaller chunks feels like hitting checkpoints in a marathon. It’s encouraging and keeps me focused on my overall trade plan.
I’ve seen so many traders make impulsive moves that ruined promising trades, all because they let their emotions take over. Don’t let this happen to you.
Scaling out won’t make you immune to nerves, but it will help you feel more confident and controlled.
Next time you’re green on a trade, don’t hold all of the contracts to your final target.
Set pre-determined points at which you’ll scale out of pieces of the position … and stick to those points.
Happy scaling,
Ben Sturgill
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*Past performance does not indicate future results
