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Close at 50% of the premium, or hold to expiry?

Once you've collected half the premium, the rest comes slowly and the risk stays whole. Here's the math on closing early, and a put held to expiry that turns a small win into a loss.

Options guide · 8-minute read · Updated 2026-10-26

The short answer

Closing at 50% means buying back the option once it's worth half what you sold it for. You keep half the premium and remove all the risk. Holding to expiry keeps the other half on the table, with the full risk of assignment still on.

For most sellers running the wheel strategy, closing at 50% is the better habit. The last dollars of premium are the slowest to come and the most dangerous to wait for.

Risk left per dollar left

Say you sold a $45 put for $1.00. The most you can make is $100. The risk is the strike times 100.

The risk column never shrinks. Only the reward does. At $0.20, you're keeping a $4,500 promise open to earn $20. That's the whole argument in one table.

The last-week trap

Theta is fastest in the final week. That's why holding feels right: "it's melting fastest now, why leave?"

But Gamma is also highest in the final week. A $2 drop that would barely dent a 30-day put can swing a 5-day put from nearly worthless to deep in the money. See theta decay explained and gamma risk for option sellers.

Fast decay and fast danger are the same thing, seen from two sides.

Side by side

The spread row is real. Buying back costs the bid-ask spread a second time. On a $0.50 buyback with a $0.05 spread, that's $5. Small, but it's part of the price of closing early. See how the bid-ask spread taxes option sellers.

A worked example where holding goes wrong (an illustration, not a trade idea)

Made-up stock XYZ trades at $50. You sell a 30-day put at the $45 strike for $1.00. Cash set aside: $4,500.

Day 12. XYZ is at $51. The put is worth $0.50. You've got two choices.

• Close now: buy it back for $0.50. Net: +$50. Cash freed. Done.
• Hold: 18 days left, $50 still to collect.

You hold. Days 13 to 24 are quiet. The put drifts down to $0.15. You're up $85 on paper. Six days left. It would feel silly to pay $15 to close.

Day 25. XYZ reports a problem before the open. It opens at $41.

The put is now worth about $4.50, almost all of it intrinsic value. Expiry is in five days. There's no time for the stock to recover and no credit roll that moves the strike anywhere useful.

A $350 swing. On day 24, the difference between the two paths was $35. The held trade was "winning" right up to the morning it wasn't.

If XYZ keeps falling to $36 over the next month, the held seller is down −$800 on a position that was once up $85.

What closing at 50% actually does

It's not about being scared. It's about matching reward to risk.

With a 30-day option, you often reach 50% in 10 to 15 days. Close, then open a new trade with a fresh 30 days. You spend more time in the slow, calm part of the decay curve and less in the sharp part.

You'll pay more spreads, you'll make more decisions, and you'll leave money on the table on the trades that would have expired fine. That's the trade.

Some sellers use a time rule instead: close everything with 7 days left, whatever the price. Same idea, different trigger. See take profit early or let theta work.

Pick this if, pick that if

Close at 50% if:

• You want to remove risk once most of the reward is in.
• You can't watch the position every day in the last week.
• You'd rather open a fresh trade than squeeze the old one.
• Earnings or news lands inside the remaining days.

Hold to expiry if:

• The option is already nearly worthless and the spread to close is a large share of what's left.
• You actually want to be assigned: you sold the put to buy the stock.
• There's no known event left before expiry.
• You accept the last-week swing as the cost of the last dollars.

A middle path many sellers use: place a good-till-cancelled buy-to-close order at 50% the day you open the trade. Then you don't have to decide under pressure. See buy to close explained.

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