When should you exercise or sell options?
Occasionally a stock pays a big dividend and exercising a call option to capture the dividend may be worthwhile. Or, if you own an option that is deep in the money, you may not be able to sell it at fair value. If bids are too low, however, it may be preferable to exercise the option to buy or sell the stock.
Is it more profitable to exercise or sell options?
Holding an option from OTM all the way until it gets ITM is the most direct and most profitable way of trading options. In almost all of such cases, it is always more profitable to simply sell the options and take profit instead of exercising for the underlying stock.
When should I take profits in options?
Having pre-determined profit levels (traders' set level like 30%/50%/70%) is important to take profits, as margin money is at stake for option sellers. In the case of reversals, the limited profit potential can quickly turn into an unlimited loss, with the increasing requirements of additional margin money.
What is the most successful option strategy?
The most successful options strategy is to sell out-of-the-money put and call options. This options strategy has a high probability of profit - you can also use credit spreads to reduce risk. If done correctly, this strategy can yield ~40% annual returns.