This may be suited for options trading or adjusted for the buying and selling of shares. When one creates a trading plan they create that plan with the opening of whatever position they want to start with in mind along with price points where they plan to add to that position and where they would plan to take profits. Premise: If share price reaches price point "p" purchase starting position. If share price moves in the direction as expected. Purchase additional shares at "x" price point. As share price continues to move in favor of the position at price point "y" add to position again. At first profit target sell part of acquired position as share price moves to second profit target sell remainder of position. Query: If price points x and y happen in after hours where speculator cannot fill additions to current position does speculator (a) attempt to fill remainder of position at market open. Or (b) accept the position as it stands and sell that position at profit target.? Please feel free to answer in yoir own words. This was asked as a means of psychological study.
It sounds like this basic plan relies on leverage (options) continuously working in the traders favor, particularly in the daily fashion. For direct stock shares alone that approach can work without leverage, but in that case the remainder of this comment doesn't apply. Doubling down the "winning" options (leverage) by adding more to the exact same winning position is unlikely to succeed long term. It's more likely to interfere with or wipe out prior gains in all reality. Rather than sell outright or add additional leverage buy buying more of the same leveraged trade, a more sustainable approach is to lock in some of the previously leveraged gains, while leaving leaving some level of max profit available (when available, still more likely than the above continuous win implied above). Stock XYZ is at $90.... Buy the $100 strike call for $1.25 3 weeks out (~80x leverage above $101.25). Stock goes to $105 in 7 days with 14 days to go Sell the $110 strike call for $1.75 (Lock in gains of $0.50 while converting position to a vertical spread) Stock goes to $109.72 on expiry. You still profit 9.72-1.25+1.75 (+800%, but you locked in 40% gains 2 weeks ago...) So if options are in the picture at all.. You should probably to be thinking about those scenarios, rather than how to react to things you can't control like after hours. All numbers above are made up on the spot as the volatility is unknown, but guesstimated based on prior success.
do you post anything on this forum except for "thanks for sharing"? just wondering if you are some kind of a bot. if not i do apologize in advance. i do find it a bit odd how nearly 100% of your posts on this forum are very similar...
Riley yes I personally do this with options. I guess I would say that for me when I run one of these scenarios. I open my starting position at $1 for strike price of x. As the market goes in my favor I add to the same strike price x at $1.05. I now have 2 contracts with an average price of $1.025 (estimated because I know I am averaging up) as market continues to go in my favor I sell 2 contracts of strike price x at 1.15. I will have made gains. Granted I did average up. I am not doing this for long term holdings this is for trading or swing trades. Personally I have had success with this system when everything os done within a weeks time frame.
I lost my original reply on my phone.. ugh! sounds like you may have a good edge if it’s working for you! More power to you! After hours moves have annoyed me most on earnings gambles personally. Back to the original question.. if there’s room to make the risk/reward worth it still, approach A for sure. when there’s not.. approach B every time. Should be able to quantify this based on original targets and prices on open to some degree.
Riley so after these past couple of weeks I have really gotten to look at this concept in action a couple of times. So for options the risk/reward depends on the premiums the trader is taking, in my case risk low for high reward. But I determined when option prices got to be so high on spy that I was having to buy otm puts with an obserd strike away from the trading price. (Example: 254strike when share price was at 275) and even that put cost me $192 per contract. Which is far more than I like to risk on any single contract. But I did take your advise here and consider the risk/reward potential. (Wow that was a tangent) So as far as the past couple of weeks go and getting to really look at this type of play in action. Where the share price follows your trading plan but it takes place after hours. I was able to record the data enough to notice that, for options, filling the rest of the planned position is an extremely costly endeavor. The premiums were often 50-100% higher the next morning for those same strike contracts. Even averaging up with the amount required to fill the position would not be worth it. I essentially determined that ,for options, filling the full weight of the position at market open when you are very certain of where the price will go is simply to costly and to risky in the end. Therefore, when building a position (at least with option contracts) it is best to take the position you get and sell that position. If the market hits your target range for adding to your position in after hours. You ignore that and sell the position you have at your target price. This may be different for buying and selling shares. I will update this post if I ever find a worth while trade that I can afford the shares.
