“My main problem is the risk-reward ratio in option buying. For example, in one trade, my entry was at 174, my stop loss was 153, and my target was 240. The premium moved up and touched 207, but then reversed and came back. In this type of situation, what should I do? Should I book partial profit, trail the stop loss, or hold the trade according to the original target?”
The biggest mistake is putting stop loss in an options trade.
I know many will not agree, but I feel one should never have an SL for an options buy trade.
Then position size have to be really small - if it does print, gamma will do the job of increasing your size. If you’re betting more than 5% of your trading capital in a trade, SL is must.
Who can tell? That’s the same as asking: Do you think it’ll go down even more? Do you market will reverse? Should I close my position with this profit? I guess the essence of it boils down to “Do I want to I risk the profit to get more profit?”
Without a definitive edge and a strategy to execute it, if you fell compelled to trade.
Just do spreads instead and hold till expiry.