High probability Trading – Avoid Delta Exposure in Expiration Week
Frank Fahey

An integral part of every trade is the point where you exit the position. Every trader hates to leave money on the table and being able to choose the optimal time to close a trade can make a big difference in your profitability. Most of the strategies we teach at Discover Options Mentoring involve spreads. We have found that the best time to exit a strategy with front month options is seven or eight days prior to expiration of a short-term option – both short and long.

Most spread strategies involve simultaneously selling and buying options. Strategies with short options are the most profitable when they close at the short strike price. All of us have looked at a position and have been enticed by the trader’s tease: "If the price of the underlying closes at the short strike, then I will make $X more at expiration".

When you fall for the siren call of the increased profits during expiration week, you are ignoring the increased risk which comes with the potential profits. The increased risk comes from the delta exposure of the short option combined with the possibility the underlying will not expire at the short strike.

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