"Profit First" Options -- How Much Would They Cost?

[tradingjournals]

Assume one wants to buy an option that would pay for the loss due to a stop, say L dollars away from current market, if the position never showed at least a profit W. If W >0, it is what I would term "profit first" options. Would they be useful in your trading? If yes, how? How much would you pay for them? How to price them?

If the term "Profit First Options" is not owned, I reserve the rights to it.

 

[sle]

Quote from tradingjournals:

Assume one wants to buy an option that would pay for the loss due to a stop, say L dollars away from current market, if the position never showed at least a profit W. If W >0, it is what I would term "profit first" options. Would they be useful in your trading? If yes, how? How much would you pay for them? How to price them?

There already is a bunch of products like that, KI/KO puts, touch-no-touch etc. Exotics desks price them in monte carlo (local vol, usually) and they are fairly common in FX and less so in equity space. There are even "perfect trader options" out there.

My experience is that anything where you are buying convexity on a continous barrier will look prohibitively costly.