50% stop loss on long options?

[NoDoji]

Quote from spindr0:

If your call value had gone to zero for a total loss, you'd would be telling us how that stop loss saved you a bundle

Yeah sometimes those "woulda couldas" haunt you for a while.

I had 80 Oct BRL calls in spring 2008 when the stock tanked on what I considered fundamentally irrelevant news. My plan was to hold them for several months (they were 5 months out) because I was certain the stock would retrace most of way back, but it would take some time. I sent my husband an email about the trade and said "this one will net us $120K before the fall".

Moved in my favor immediately and as soon as it started its first pullback a couple weeks later, I closed the position for an $8600 gain, figuring I'd take profits and get back in again when it retested that low.

It did retest that low while I was on vacation a little over a month later. A couple days after I got back BRL was bought out at a price $20 a share above my strike and would've netted us $144,000.

So do I pat myself on the back for taking the profits instead of letting the position draw down and holding/hoping?

Or do I smack myself for failing to trade the plan?

(Or do I tell myself that as a trader one should never take vacations unless one will have uninterrupted internet access?)

 

[ramaTrade]

Quote from turkeyneck:

Is this a good rule of thumb to follow if the market moves against you so you don't lose every penny on the long options?

Your question is neither trival nor naive, too many people who trade options ( long or short ) lose every penny they put in.

As a rule for long options, your rule is very sensible as long as you can stick to it no matter what.

 

[spindr0]

Quote from NoDoji:

It did retest that low while I was on vacation a little over a month later. A couple days after I got back BRL was bought out at a price $20 a share above my strike and would've netted us $144,000.

So do I pat myself on the back for taking the profits instead of letting the position draw down and holding/hoping? Or do I smack myself for failing to trade the plan?

(Or do I tell myself that as a trader one should never take vacations unless one will have uninterrupted internet access?)

I had the same thought about being away on vacation without internet access. That gig is for investors