 You placed an option, you're in the money, but you also have time left on that option. What do you do? Is it A, wait and let it expire worthless to maximize profits? B, you buy it back to maximize profits? Or is it C, you buy it back with a smaller profit to reduce risk? After watching this video, you will definitely have the answer to this question. If you're watching this video, you most likely have traded options before or you're just getting started with it. Either way, you made a great choice to educate yourself more on the topic before doing it even more. So let's get started. In this video, I will focus on maximizing profits when selling options, not buying them, selling them. Because it's more delicate than just saying, you know, take profits at 80 or 90%. But if you wanna know my personal opinion and my personal rule is to take profits at 50% for every purchased option, unless it's a leaps option. Now let's look at some sold options. Falco is already disturbing this video. Again, so my general rule of thumb, if you are lazy with it and you don't wanna do the math, is to take profits at 90%. What does that mean? 50%, 90%. I'm saying take profits when your option contract increases by 90% in value. One example is if I sold a covered call and I receive a premium of $1,000, I would buy that contract back when the option is worth $100. That means my option contract got me 90% of the premium, and I buy back the 10%. This is just a general rule because it doesn't look at days left on the contract, which is highly important if you wanna maximize profits. So here are my personal rules. Step one, know your planned PPD. PPD stands for premium per day. I always look at the premium per day that one contract pays me. So for example, if I have a contract that pays me $1,000 over 25 days, I know that my premium per day is $40. The next two steps will be to figure out what my current PPD is and my remaining PPD. I know this sounds very confusing, but trust me, after this video, it will make a lot of sense. We will go through an actual trade that I have and hold in my portfolio and we can determine together if I should hold onto it or close the position. On December 1st, I sold two neocalls with an expiration date of December 31st, which paid me $150 in premium. I will just use 30 days for the duration and five days for the current time because the numbers will flow better, trust me. So step one, what is my planned PPD? The planned PPD, there's so many P's in there, is basically what you get when you sell your contract. In my case, it's this. I have a 30 day contract which paid me $150. So $150 divided by 30 days is my planned PPD of $5, which means my contract basically pays me $5 per day if nothing changes in the stock market and I just wait till expiration date. So basically when I sold this contract, I knew if NIO doesn't do anything, I will be keeping my 200 shares and I get paid $150 over the 30 days. Step number two, what is my current PPD? Let's take a look. As I said, I'm gonna be using five days instead of six just because the numbers will look better. So five days passed and my contract is worth $100. If I divide that by five, my current PPD is $20. That means that my contract made me $20 every single day for the past five days. So I'm already way above my planned PPD, which is great. And step number three is what is my remaining PPD? Let's take a look. So I have 25 days left in this contract and $50 more to gain. So if I take the remaining $50 and divide that by the remaining 25 days, I have a remaining PPD of $2. What does that mean? The remaining PPD is basically for the next 25 days to get the 100% of this premium, I will get $2 every single day if NeoTrade's below 50. All right, now I have all these numbers. What am I gonna do with those? I'm gonna tell you. As soon as you know all these numbers, you can take a look at the cheat sheet and then decide if you wanna hold or if you should hold or close the position. You should close the position if the current PPD is bigger than the planned PPD. And the remaining PPD is smaller than the planned PPD. You should hold your contract if your current PPD is smaller than the planned PPD and the remaining PPD is bigger than the planned PPD. There's so many PPPPs in there, it's a bit hard. So when I look at my numbers for this specific Neo contract and take a look or peek at the cheat sheet, I easily know immediately that I should get rid of that contract. Now, if I buy back those two contracts, I have to pay $50 to get them back. Now, if I wanna close this position, I have to pay $50 to buy back the two contracts. This releases my 200 shares of Neo and I'm good to go, the trade is over. And I made $100 in five days. So I got paid $100 in five days which is basically 66% of the premium that I initially received. And the $100 that I received for the five days are basically 1.17% of my initial investment in Neo. So technically my investment in Neo which doesn't pay dividends just paid me a 1.17% premium. Now the next step will be to sell another covered call with the higher premium and a different timeframe. Obviously this depends on what I believe will happen with Neo within the next couple of weeks or months but that's the main idea of when to take profits. Hypothetically, if Neo bounces back to the price when I sold it on December 1st, I could sell the exact same covered call once again with probably a higher premium. I could probably get paid another $100 for the remaining 302 weeks left in December. And that's how you maximize your profits. So the answer to the very first question in this specific case is B, you buy it back to maximize profits. As you can see, it's not that easy to just say, oh yeah, I'm gonna let it expire worthless. I'm gonna buy it back or I'm just gonna hold it or you always have to look at the specific option that you were holding and then you have to decide for yourself. Does it make sense for me or not? But the cheat sheet is definitely a small help. I only work with that cause I don't wanna get emotionally attached. So you know, if I believe, oh no, it's gonna go do this or do that. No, I'm gonna stick to the cheat sheet. If the numbers say I need to get rid of the contract I'm gonna do that. If the numbers say hold the contract then I'm gonna hold it. I'm gonna sum it up one more time. So if I buy options, if I buy contracts I always take profits at 50% unless it's a leaps option. If I sell options, I do the math and then decide according to the cheat sheet if I just hold on to the contract or if it's smarter, financially smarter for me to get rid of it and sell another one. In the end of the day, I really wanna maximize profits and I don't wanna just get emotional attach to a specific contract just because I believe certain things will happen. If you're lazy and you don't wanna do the math for every single contract I think 80 to 90% is a good guideline for yourself. If your contract reaches the 80% gain you can basically buy it back and you're good to go. I hope this video helped you a little bit. Let me know in the comment section below. I'll see you next time.