Hit the sell button

This week presented me with a great example of why it is important to sell into strength. You no doubt see various traders on StockTwits make this point often. It certainly is important to let your long winners run while you raise those trailing stops, but it is equally important to take some profits along the way.

For my example this week, I bring you MIPS (Mips Technologies Inc). As has been the case lately, Monday showed us a lot of strength out of the blocks for many stocks. I was long the Feb 12.50 strike CALL (35 total contracts at one point) and decided to keep an extra close eye on it as the stock was making a very strong move.

Once the stock hit the 14.50 level, I began to plan selling some of my calls as it had more than exceeded my initial target. As the upside strength continued, I decided to shoot for a print of 15 on the common in hopes that my calls would show a 2.50 print or better. They did. I took most of it off during a 20 minute window where the stock was hanging around 15, then adjusted my trailing stop on my calls to 2.25 on the balance. The stop did hit and the trade is now closed.

In looking at MIPS today, it is struggling to hold 14 so this is quite a pullback from the high reached on 2/14.

Take those profits and raise those stops along the way.