You never want to sell too early when you have a monster option trade in progress. Sometimes when you catch a wave and turn a small amount of money into a big amount of money your emotions will try and get the best of you. When you take a $1,000 investment and turn it into $5,000 in a matter of three days, you got the devil on one shoulder and an angel on the other. This is where we are at with our DryShips (DRYS, $11.90, up $2.45) trade.

The devil is telling us that we can hold on to the entire position and try and make $10,000 by Friday. The angel is telling us that we should sell half of our December 7.50 calls (OOCLU, $4.80, up $2.20) and let the rest run with tight stops. If you bought 10 contracts Monday morning at 90 cents when the blog came out then your total investment would be $900.

By selling 5 contracts, we bank $2,400 while we still have the other $2,400 in play. The return alone on the “banked” $2,400 is what, 175%? If you closed the entire trade your return stands at a whopping 400%…in two days! If you close half of the trade and set stops at $4.00 for the rest of the position, you will have turned $900 into $4,400.

Trading options is like playing Deal or No Deal. The further you push your luck, the worse it can get. Yeah, it can also turn out pretty nice but remember it pays to always give yourself safe outs. Trust me, it’s been hard for me to sleep at night this week because I can’t wait to wake-up in the morning in hopes of seeing the cash register ringing for DryShips. However, these are safe outs and we all know good always wins over evil.

Here’s to DryShips continuing its run but when the party’s over we will have already made our exit. The stock’s run from under $5 to $12 has been our Deal or No Deal and now it is time to make a deal with the banker.

Rick Rouse