Profit taking...not for me...yet.

I am receiving profit taking alerts from the main active trading service ... but the alerts are for positions that I am not in. Either they are positions entered before I was on or are spreads that I did not take or even one or two that I just didn't chase the price on as it ran away too quick for me to get into.

So far almost all the profit alerts are just that, profit alerts, not loss takings. A few notes about positions that may expire worthless but too few to be of concern.

BTW, I decided that I am willing to start at 5 cents higher than the recommended price of the option depending on a few variables which I decide upon at the time...like how close to the market close, activity and strength or weakness of the stock. I need to test the limit order to see if I place an order with a limit above the ask price will I only pay the ask or will I get nailed for my offer? I know I am best, in most cases, to set the limit at or even under the bid and wait for a spike. Although with low deltas (0.5 or less) it takes a larger price change to initiate a drop in the option price to make this strategy work out.

I must admit to being a little over zealous in my need to get active in this trading and my need to make a trade. I placed a few trades based on spread recommendations by only buying the underlying call and not selling the corresponding call... my account is not funded enough to do that right now. In my haste I didn't quite realize the implications of the trade in it's entirety. The sold call, in a few cases, may have been the basis for the profit.

Yesterday a trade was just that. Buy a call for 14 cents or less and sell a put for 16 cents or more.

Net 2 cent credit off the bat...not a bad proposition.

I had decided to leave all alerts alone unless I could execute the entire trade. This one was a good place to start sticking to that rule.

Today the trade was closed. Sell the calls for 9 cents or more (a loss on the initial call only position) and buy back the put for 3 cents or less. A total of 6 cents credit.

I would have lost 5 cents on the call had I bought them. The put, being a naked put (the call does not cover a short put), would require $25,000 account balance. Not something I am prepared to fund right now so the trade was not possible anyway. That and a naked put is a VERY risky trade as I would be obligated to buy the stock at the strike price at expiration should I keep it. At the very least I could buy back the put to close the trade for a loss based on the option price but it still amounts to a loss by at least the difference in the strike and the price when I eventually bought back the put.

I would want more faith in the trade alerts than I have right now to risk selling naked options based on a service.