Since the calls were cheap, we bought more than we usually do in order to size the position appropriately.
This is always nice as it gives us the flexibility to scale out of the position. In other words, if we only buy two calls, and we sell one on the double, then we have no choice but to close our entire remaining position at the same time.
In the case of SOUN, calls were only $30 per contract, so I own a larger quantity than usual. I’m going to take advantage of this and scale out over time. I did the same thing with PTON when that position went more than 10x.
I’m selling 50% of my remaining position today (or 25% of the original position). I think it is a good rule to always sell something at 10x. Ideally, there is continued strength and we can sell another tranche at higher prices soon.
And if the common stock breaks below $9/share on a closing basis, I’ll look to close the entire trade.
Here’s the chart showing a big polarity level at those Q1 highs.
I also lean on momentum to help manage these kinds of winners. As you can see, SOUN is working on a fresh 9-month range breakout. It is currently trading around $9.70 (today’s intraday candle is not shown).
Meanwhile, momentum is barely overbought yet. The RSI-14 indicator hit far higher levels back in February and July. This makes me think this breakout has legs. I’ll look to sell more when the RSI-14 is at an extreme.
