Short options
What is the optimal profit target percentage (e.g., 50% of max premium) for short premium sellers?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Some premium sellers close short positions after capturing around 50% of the maximum potential premium rather than holding to expiration, aiming to reduce exposure to late-stage gamma risk and free capital for new trades, though this is a personal risk choice, not a fixed rule.
How it works
Closing early forfeits the remaining theoretical profit but can improve the win rate and reduce the chance that a late adverse move erases earlier gains.
An example
A trader who sold a spread for $2.00 might buy it back for $1.00 once it reaches 50% of max profit, rather than waiting for full decay near expiration.
Risk & limitations
OIC notes that an early-exit approach has trade-offs including increased transaction costs and gives up potential additional profit if the trade continues favorably.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.