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"How far ahead of expiration should I sell?"


Question By Pgohil

"How far ahead of expiration should I sell?"

If I do not wish to exercise an option that I purchased, how far ahead of the expiration date should I sell?

Asked on 10 June 2009

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Answered by Mr. OppiE

Hi Pgohil,

Technically, you can sell your options, profitable or not, anytime before the option expiration. Which means that you can still sell those options on expiration Friday itself before market close. However, deciding exactly how many days ahead of expiration to sell is a slightly more complex decision to make.

First of all, you need to consider how long more is expiration and whether or not you are at a comfortable profit level. If there is still a significant amount of time to expiration and the options trading position has already made your desired profit level, then you might want to close it as early as possible so that you can still recover some of the extrinsic value still in the option and also seal in your profits so far.

If there is just a few days more to expiration and you expect the stock to still move strongly in your favor, you might want to hold all the way to expiration day before selling in order to maximize potential profits since the extrinsic value is already quite low a few days ahead of expiration.




In conclusion, you can sell your options anytime before expiration but exactly how many days before expiration does require a lot more decisions which only you can make. In general, selling the options rather than exercising them does make you more profit since you will be able to save on the exercise commissions and probably also recover some of the extrinsic value remaining in the option.


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