The main purpose of Sell or Buy Me Out features is to allow digital options traders to minimize losses. However, this feature can also be used to lock in some profit. Within the broker digital options platform, traders will be presented with the opportunity to sell some of their open trades back to the broker. Whenever the trade is in an out of the money position, the offer price will be less than the investment amount. Whenever the trade is in an in the money position, the offer price will be higher than the investment amount.
When using this feature, you’ll need to plan properly in advance for its use. For starters, it’s an excellent idea to decide in advance that you may need or want to sell. For example, you could enter into a trade feeling less than confident about the upcoming price movement and be prepared to execute a sell quickly should the asset price start to move against your position.
Another part of the strategy would be to try to sell at a point when your position is not too deeply out of the money when trying to minimize loss. Selling at that point will equate to a lower purchase price offer. This is obviously not what you want. Of course there is a fine line here, as you cannot know in advance just where the asset price may go. The best plan is to sell soon after you see the price moving solidly against your prediction.
Be aware that retracements and pullbacks could trick you into thinking that your trade is headed towards an out of the money finish. Market prices fluctuate. That’s a simple fact. While it is wise to consider selling before a trade begins, be careful not to sell too soon. Depending on the length of your expiry time, give the price action at least a few minutes to set up.
The best selling scenario will be when the asset price is clearly trending in one direction or the other – either with you, or against you. This will make the decision to sell easy and should allow you to cut a loss or lock in some profit. Within the broker digital options platform, simply click the “Sell” button to the right of the open trade to see your purchase offer amount. You will be given the chance to accept or reject the offer.
Brokers digital options makes it easy to sell open trades. This is one of several optional features offered on open trades. The strategy here is basic. Use this tool wisely by learning when to recognize a prospective loss or profit as far in advance as possible. Also, try to find some balance in regard to execution. You should not need to sell the majority of your options if you’re completing analysis and planning your digital options trades appropriately.