Options Expiration: The Profit-Taking Power Feature You Didn't Know You Had

Hello again Spirit Animals,

If you're new to options, the concept of an "expiration date" might feel like a limitation. After all, stocks don't expire. Why would you want to trade something with a ticking clock?

But here's the thing — that ticking clock might be one of the most powerful features options offer, especially if you're a trendfollowing trader who struggles with taking profits.

Let me explain.

Every options contract gives the owner control of shares at a specific strike price up to and including its expiration date. After that, the option either expires worthless, or — if it's in-the-money — it converts to stock through assignment. Most options traders don't intend to take possession of the underlying stock, so let's set that case aside for now.

For the rest of us, if we're still in a profitable option (or options spread) as expiration approaches, it's decision time: Do we exit and take the profit? Or do we roll out to a further expiration to buy more time?

Either choice has its merits. If your trade plan calls for rolling out to keep riding, then by all means — do it!

But I want to talk about a bigger idea here: using expiration as your built-in "profit-taking governor."

If you're a trendfollowing trader like me, you likely have more than a few regrets about big winning positions you held on to for too long, watching significant open profits evaporate. Sometimes, trailing stops just aren't enough to protect the majority of your gains. We've all been there. The stock runs 40% in your favor. You're feeling great. Then it pulls back and your trailing stop gets clipped — locking in a fraction of what was on the table at the peak. Or worse, you keep widening the stop because you "believe in the move," and eventually hand back most of it. It's one of the hardest parts of trendfollowing: knowing when enough is enough.

Over the years, I've developed a zen attitude regarding taking what the market offers — and nothing more. Here's how it works in practice: When I put a trade on, I select an expiration series for a reason. Maybe it's 30 days out. Maybe it's 60. Maybe it's a quarterly cycle. Whatever the timeframe, I've made a deliberate choice about how long I'm willing to give this trade to work.

Then, if I'm still in a profitable position on expiration day, I take that as the universe telling me: enough. You've traveled as far as you can with this particular option. It's done its job. Time to let it go. Take the profit.

No agonizing. No second-guessing. No "but what if it keeps running?" The expiration date becomes your decision-maker, and you're freed from the emotional tug-of-war that erodes so many good trades.

Now, you might be wondering — what if the stock keeps running after I close? Great question. And the answer is simple: treat it like a brand-new trade. If the underlying stock is still moving in your favor after you've closed the expiring position, there's absolutely no rule that says you can't get back in. Give it a fresh set of risk parameters. Size the new position according to the same risk unit you use for every new trade. Enter at a new strike price and a new expiration series. What you're not doing is dragging forward the emotional baggage and inflated position size of the old trade. You're starting clean. And that discipline is what separates consistent traders from those who ride the rollercoaster.

Here's something else I've noticed over many years of trading: options expiration days surprisingly act as "tops" for stock runs more often than you'd expect. Whether it's the effect of options market makers unwinding hedges, pin risk, or simply the collective activity around expiration — price tends to stall or reverse near these dates with notable frequency. So by using expiration as your natural exit point, you may actually be getting out near the best possible time more often than not.

The market will always tempt you with "what could have been." But the most successful traders I know — the ones who are still standing after decades — have learned to take what's offered gracefully and move on to the next opportunity. Options expiration gives you a built-in mechanism to do exactly that. It's not a bug. It's a feature. Maybe the most underrated one in your entire trading toolkit.

Sometimes, enough is enough.

Ready to put this approach into practice? At All Star Options, we trade with this kind of disciplined, process-driven mindset every single week. Members get my real-money trade ideas with specific strikes, expirations, and — most importantly — the reasoning and risk management behind every position. If you're a trendfollower looking for a smarter way to trade options, join us at All Star Options and let's make the next expiration cycle work in your favor.

Sean McLaughlin | Chief Options Strategist, All Star Charts

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