# Entry and exit logic

**OPT-18 · Core Options · Core**

**Lesson question:** When has the remaining trade changed?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** OPT-F01, OPT-F02, OPT-F03, OPT-F04

Entry criteria should identify the thesis, vehicle, executable price and adverse case. Exit criteria should describe what happens when the target, timing or premise changes. Waiting for expiration is a choice, not a default obligation.

Evaluate the remaining position from today's value as well as recording original performance.

## Understand the mechanism

A winning spread may have less reward left while retaining substantial downside from its current liquidation value. That opportunity-cost view differs from the original maximum loss.

Closing a spread requires an executable combination price. Legging out can temporarily remove protection or create unwanted stock exposure.

## Walk through the process

Before entry, state the relevant underlying and option conditions. Plan target, invalidation, time and event reviews. After a material change, compare keeping, reducing and closing on their forward economics.

Rolling is a new trade, not automatic management success.

## Contract and decision boundary

Terminal examples use simultaneous intrinsic realization of all stated legs, before unspecified costs. Actual American exercise, assignment, early liquidation and broker handling can create different interim cash needs. These fictional comparisons are education, not orders or personalized investment advice.

## A worked example

A fictional 100/105 bull-call spread bought for two can now be sold for 3.20. Closing realizes 1.20 per unit before costs. Holding offers at most another 1.80 at terminal maximum width five, but can give up the current 3.20 value.

That does not dictate an exit; it describes the changed choice. The graph compares current close value with terminal outcomes, excluding costs and operational complications.

## Graph: Entry and exit logic—worked comparison

**Horizontal:** Underlying at common expiry (USD)  
**Vertical:** Additional P/L versus closing now (USD)

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/options-strategies/OPT-18.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

A trader holds solely to reach maximum profit without reviewing remaining downside. A target based on an old entry quote can also survive after execution changed.

## Check your understanding

### How much additional terminal reward remains above a current spread value of 3.20 for width five?

**Answer:** 1.80 per unit.

**Why:** Compare five with today's liquidation value, not only the original debit.

### What is the critical failure to avoid?

**Answer:** A trader holds solely to reach maximum profit without reviewing remaining downside. A target based on an old entry quote can also survive after execution changed.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: When has the remaining trade changed? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [OCC Options Disclosure Document](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)

- [OIC Strategy Reference](https://www.optionseducation.org/strategies/all-strategies-en)