Confusion on when to exit!!!!

I sold the following two Nifty options each for 190 a month before.

Jun-2009-4200-CE
Jun-2009-4300-PE

I need your expert comments on the exit strategy. My initial assumption was, if market goes beyond 4250 +/- 380, then I will exit. Otherwise leave it to expiry date. (Nothing new, short strangle ).

Right now they are trading at 158 Call + 65 Put. Should I exit as I could buy them back at ~220?

Reason for my confusion is, it once went to 4600 (which is the exit point), but there was a huge resistance, so still I kept them. Now between the following two thoughts, I am not able to conclude

I am pretty sure in all your experience you would have crossed this many times. I am trying to reach that maturity level.

(1) Stick to the exit plan (Strike Price +/- Option Sale price) and leave it to expiry, as long as market trades within the range. << Advantage, time decay. We may or may not gain depending on how the market is at expiry date (Another 1 week).
(2) Buy back the options if there is an intermediate point (like today) where we can buy back at a 50% discount. << Advantage, we are minimizing the loss and still exit with reasonable profit (which is exactly what is expected in options, that is why couldn't ignore this option ).

Senior traders, I am sure, my confusion might be very novice for you folks. But help me to come to a conclusion :sos: It would be great if you could explain the actual fact that I am missing

Thanks a bunch.

Interesting question that we options trader always fact.
I will ask following question first -
1) What is time value left in the position. Mkt being at 4313. Yr 4200 call has intrinsic value of 113 and put has intrinsic value of 0 cause it is out of money now.
I.e. out of 200 Rs of current price, 113 is real and 87 Rs is time value.
So if market doesn't go anywhere but stays at 4313, then next 4 days you are going to gain 87 pts thru time decay.

2) What is the your reading of market level by expiry?
This position will make max profit if nifty expires between 4200 and 4300 where the risk graph has horizontal line. As market moves away from this range, your profit potential is reduced.

3) Based on above two answer, u can assess Max profit in remaining 4 days with Max loss in remaining 4 days and take a decision to book profit now or enjoy the time decay.
eg. if you see market going 125 points up from here.. that means you will loose 125 pts of profit on short call position.. whereas if timedecay will only give u 87 rs. hence the ratio of reward to risk 87/125 is less then 1..
so close the position.

But if u see market closing between 4250. then your liability will still be 100 pts (because ur call/put positions are reversed.. in idea strangle u would sold 4200 put and 4300 call then the expiry at 4260 would have given u max profit. But in this case, your 4200 short call will be worth 60 and short put will also be worth 40.. ie your liability on expiry day will still be 100 pts.
So your reward risk ratio will be 87/100 pts.. again it is less then 1.

You can extend the same logic and evaluate the effect of up /down move on nifty from here on your total profit from the position.
Remember, even on the expiry, you will have to give back minimum 100rs back due to the way u have structured it.

I am sure this learning from profitable trade will help u in future.

Happy Trading

I understood in few days that, I switched in strangle. That is my fault. I am sure, I won't repeat again.

The way of calculating reward to risk is nice. :clap: This is definitely good learning of how to look at the current position. Make more sense. Thanks AW10.