I have been trading options for some time but keep making mistakes with buy to close orders.
I often miss the timing or pay too much. I want to ensure I’m doing this correctly.
What is the best approach to manage buy to close orders and avoid losing money?
Liquidity’s huge but everyone ignores it - always check open interest before you enter. Under 100? You’ll get screwed trying to exit.
Set your buy-to-close 2-3 cents under midpoint and wait. Don’t be like most traders who panic-buy at ask and kill their profits.
Stick to the rules - close at 50% profit or 21-30 DTE, whatever hits first. Don’t overthink it.
This walks through the whole process if you need to see it done.
Timing’s huge for buy to close orders. Always check volume first - low volume means you’ll get hit with wider spreads.
Stay away from the first and last 30 minutes when spreads go nuts. Mid-day trading usually gets you better fills.
Stick to limit orders and start below the ask. If it doesn’t fill in a few minutes, just bump your price up.
Look at the bid-ask spread first. I aim for about 30% profit.
Set profit targets at 25-50% of the collected premium. Use limit orders, not market orders. Monitor theta decay daily. Close positions 7-14 days before expiration regardless of profit.
My worst mistake? Panic closing during big swings instead of following my plan.
Now I just set alerts at my profit target and step away from the screen. Last month I hit exactly 40% on a put spread because the alert went off.
Before this, I’d sit there constantly refreshing - either bailing too early or watching my gains evaporate.