Options stoploss limit order

Stop losses are popular. But they will also stop you out of profits which may come later.
You will also be advised by many to have tight stop loss orders. Only thing that will do is make you lose a tiny bit most days until you lose it all.
Options for speculating = bad idea
Enjoy!
 
IMO: This is valid only for highly liquid options, such as ATM strikes on SPY. Look at the Bid and Asked prices for the strikes of interest over some extended time intervals to observe how loose they get. -- your order will be converted to a Market order at the worst possible moment! Whatever liquidity there was will be less at that time, and you typically will be taken to the cleaners.
I have had success in triggering an order to buy/sell then issue limit order for MID +/- 15 cents on SPX options (give up 15 cents more than the Mid Price at that instant in time). The issue here is they are not guaranteed to fill. (IF they fail, I will go in and work the order, but so far have not had to.)
Most folks structure their trades/strategies so this is not an issue. Such as enter defined risk trades, so you size the trade to minimize risk, rather than trying to close when the heat gets too bad. -- there are other options to address this, but all require a bit of forethought.
 
stockoptionstrader said:
Hi everyone,

Who uses stoplosses ( or trailing stop loss) when trading options?

Is it useful for protecting gains or will this not work?

TIA
More...
I only use actual trailing stops on a runner position. Say i pick up 10 calls, first 5 out at a predetermined profit level, then I'll scale out and hold the last 2 typically with a trailing stop, but only with ITM contracts. Works great for my strategies.
 
So let's say I have a call option slightly in the money on a highly liquid option stock:
Premium I paid is 1.30 $ and right now the premium is at 2 $. A stoploss limit order at 1.65 $ or something. bid/ask spread is 1 cent. This will not work?
 
The thing with trailing stops is that you generally need to be going for bigger % profits for trailing stops to really be beneficial. I see people try to use them for small moves all of the time, and it tends to knock you out of the trade early, when you would have been profitable if you had used a normal stop, or none at all.
 
Yes, I intend to use them for options where I have 50%-100% on and just not want to break-even on them so I can still have 25% profits. So it can work normal stop limit orders on very liquid options?
 
stockoptionstrader said:
So let's say I have a call option slightly in the money on a highly liquid option stock:
Premium I paid is 1.30 $ and right now the premium is at 2 $. A stoploss limit order at 1.65 $ or something. bid/ask spread is 1 cent. This will not work?
More...
You have no guarantee the order will fill. Typically, if you have a stop loss, you have it there to limit further losses, which is not guaranteed with a stop LIMIT order. -- google "stop-limit orders" for more detail. -- an opening gap can be an unpleasant experience and not treat you nicely.
 
stockoptionstrader said:
So let's say I have a call option slightly in the money on a highly liquid option stock:
Premium I paid is 1.30 $ and right now the premium is at 2 $. A stoploss limit order at 1.65 $ or something. bid/ask spread is 1 cent. This will not work?
More...

Or you could just spread them off into a legged vertical spread...
 
stockoptionstrader said:
So let's say I have a call option slightly in the money on a highly liquid option stock:
Premium I paid is 1.30 $ and right now the premium is at 2 $. A stoploss limit order at 1.65 $ or something. bid/ask spread is 1 cent. This will not work?
More...
Ultimately use what works for you. If you find this works, stick with it.
 
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