May I ask: In your example, a 15 delta short is ~ 1 SD OTM and 30 delta is ~ 0.6 to 0.7 SD. What is your reason for choosing 30 delta to exit/adjust or it is not your real exit delta?
Thanks.
Option writers: do you have a stop loss?
- Thread starter scotta65
- Start date
Thanks.
While we're on the subject of stops...here's what else can happen.
IB is pretty good in most areas...amazing in many areas, but like any broker - they have their days.
At 5:55pm, all my GTC futures options (SP) orders get cancelled. They just turn red. This would NEVER happen on a normal Sunday open. In fact I'm generally not even looking at it Sunday night.
The ES opens down 37 and it's a lil choppy because Greece can't pull it together. I try resubmitting my orders thru the combo tool that works every hour of every day and I get nothing but error messages - "contract not supported". I can enter some contracts manually (old school) but only one at a time and no combo's or spreads. The market is stable, albeit down a good bit...and two hours later I still can't get the interface to function properly.
So....if I had stops, they would have been cancelled and I may not be able to get into or out of anything that I have. Nothing is guaranteed...even with a basic 2% down move after hours.
This is a risk you always have to consider when you are holding anything overnight.
IB is pretty good in most areas...amazing in many areas, but like any broker - they have their days.
At 5:55pm, all my GTC futures options (SP) orders get cancelled. They just turn red. This would NEVER happen on a normal Sunday open. In fact I'm generally not even looking at it Sunday night.
The ES opens down 37 and it's a lil choppy because Greece can't pull it together. I try resubmitting my orders thru the combo tool that works every hour of every day and I get nothing but error messages - "contract not supported". I can enter some contracts manually (old school) but only one at a time and no combo's or spreads. The market is stable, albeit down a good bit...and two hours later I still can't get the interface to function properly.
So....if I had stops, they would have been cancelled and I may not be able to get into or out of anything that I have. Nothing is guaranteed...even with a basic 2% down move after hours.
This is a risk you always have to consider when you are holding anything overnight.
I have only been trading options in earnest past six months after back testing for 18 months. For what I do which are credit spreads, I trade directional and average down on losing trades, but at no time after adding onto losers the losses exceed 2% of account, But when I start adding on, am also doing opposite side at same time, so if I been putting on Put Credit spreads I will do Call credit spreads till market starts turning around then lifting the short calls. So no, I don't use stops at all since credit spreads have limited losses. Method I have designed will initially lose on 50% of original signals and using several months term options so between time decay and reversion to the mean is what I target to gain.
+1Sounds good on paper ....... but impractical in reality.
- The after-hour market.
- Unexpected news.
- Options don't move in a linear fashion. Down 50% one day, up 100% the next.
The only practical stop is the total debit or maximum loss of a credit spread. Otherwise you end up leaving lots of money on the table.
I chose 15 and 30 deltas out of thin air just for an example. There's no right or wrong delta levels. Whatever works in your comfort zone. I usually adjust/close in steps at different delta levels - ie close half at delta A, close the other half at delta B.