Should I close my CSP early for profit or let it expire?

Most of the time, you're better off closing your cash-secured put early rather than letting it expire worthless. The math almost always favors taking 50-80% of your max profit and redeploying that capital into a new position.

Here's the concrete example that makes this click. Say you sold a NVDA $420 put 30 days out for $8.00, collecting $800 in premium. Your max profit is that $800 if NVDA closes above $420 at expiration. But after 15 days, NVDA has moved higher and that put is now worth $2.00. You can buy it back for $200 and keep $600 — that's 75% of max profit in half the time.

Why does this matter? Because time is your actual product when you're selling options. You sold theta decay, and theta decay accelerates as expiration approaches — but so does your risk. Holding that last 25% of profit means you're sitting in a position for another 15 days, exposed to a gap down, an earnings surprise, or a market-wide selloff, all to squeeze out another $200. That's not a great trade-off.

The standard rule most experienced sellers follow is the 50% in 50% of the time guideline. If you can close for 50% profit before half your DTE has elapsed, close it. If you sold a 30-DTE put and it hits 50% profit at day 10, that's an exceptional outcome — take it. You've essentially earned what would have taken the full month in a third of the time.

Now, the 21 DTE rule deserves a mention here. Many sellers — myself included — treat 21 days to expiration as a hard line regardless of profit. Once you're inside 21 DTE, gamma risk starts picking up meaningfully. A position that's been sitting quietly at 80% profit can get yanked around hard in the final three weeks. So even if you haven't hit your profit target, closing at 21 DTE to avoid that gamma exposure is a reasonable defensive move.

The argument for letting it expire usually comes down to commissions and bid-ask spreads. If you're trading with a broker that charges per contract, buying back a put for $0.10 might cost you more in fees than it's worth. On a single contract, that math can actually favor just letting it ride. But on 5-10 contracts? Close it. The $5-10 in commissions is trivial compared to the risk you're eliminating.

There's also a psychological trap worth naming. When a position is at 90% profit, it feels almost criminal to close it. You're so close to the full $800. But think about what you're actually doing — you're holding a position where you can lose $800+ if something goes wrong, in exchange for making $80 more. That's an awful risk-reward ratio. The last 10% of profit is genuinely the worst trade in the whole position.

One scenario where you might let it ride: you're in the final week, the put is deep out of the money, and the bid-ask spread is so wide that buying it back costs you more than the remaining time value warrants. On something like an AAPL $160 put with 4 days left, trading at $0.05 x $0.20, you might just set a GTC order to close at $0.05 and let it sit. If it fills, great. If not, you're probably fine letting it expire — but only in that specific situation where the spread makes closing economically silly.

The bigger picture here is capital efficiency. Your account isn't a holding pen for positions you already won. If you sold that NVDA put for $800 and you can close it for $600 after 15 days, you now have $42,000 in buying power freed up (assuming the $420 strike) to go sell another put. If you run two full cycles in a month instead of one, you've potentially collected $1,200 instead of $800 on that same capital. Annualize that difference and it's significant.

For what it's worth, my personal rule is 50% profit or 21 DTE, whichever comes first. I'll sometimes stretch to 60-65% if the position is moving in my direction and I have a good reason to believe it'll keep going, but I'm not holding out for 80-90% unless the spread makes it genuinely not worth closing. The juice stops being worth the squeeze past a certain point.

The practical thing you can do right now: go look at your open CSP positions and check which ones are sitting at 50% or more profit. If any of them have more than 21 DTE left, you've got a decision to make. Run the numbers on what you'd collect by closing early versus what you'd make by redeploying that capital into a fresh 30-DTE position. Nine times out of ten, the math will tell you to close and move on.