Exiting a Trade
As it is with entering a trade, you can exit an option trade in a closing transaction by means of either (1) a market order or (2) a limit order. There are two additional ways to exit an option trade that are worthy of discussion, namely (3) a stop loss order and (4) a stop limit order.
I recommend never using a market order to exit a trade, except in extreme situations in which it seems imperative to exit a trade immediately to avoid substantial loss. Keep in mind that the fill price you receive on a market order to sell an option will not be any higher than the bid and will often be significantly lower.
As for a limit order, the situation is analogous to that of entering the trade. You select a price that you believe is reasonable ...
Get Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
