Stop Loss Orders in the Option Market

S

StillTrading

Where stop loss orders are a big part of my risk management approach, I'm still not quite sure what is an "optimal" value for where a stop loss order should be set :confused: Is there any good books on risk management specifically for the derivatives crowd? Currently I use a % loss from my cost per share , but I really don't have a real scientific approach to the whole thing... Is there a formula for it like there is for early exercise? Maybe something based off the expected return? All suggestions welcome :D
 
Quote from StillTrading:

Where stop loss orders are a big part of my risk management approach, I'm still not quite sure what is an "optimal" value for where a stop loss order should be set :confused: Is there any good books on risk management specifically for the derivatives crowd?

Currently I use a % loss from my cost per share , but I really don't have a real scientific approach to the whole thing... Is there a formula for it like there is for early exercise? Maybe something based off the expected return? All suggestions welcome :D
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For sure keep track of the time I am in the trade;
because as a buyer of options a long sideways trend will lose, unlike stocks.

:cool:

Chart/ tape book of the option index one trades helps losses & profits ;
may tighten up the stop % as time increases in trade, since i prefer medium time frame.
 
Only if you do not want to move your stops.

Old option institution such as CBOE are obsolete. They forget that they dirty secret little rules and fees hidden in last pages will effectively drive all people to use market orders to fill their dirty pockets. But in long run, people are just gonna leave them for ever.
 
Perhaps NOMORE is not the option neophyte that he sounds like. Here's a wacky conspiracy theory: NOMORE is actually Sheldon Natenbury, Larry McMillan, or Bernie Schaffer, and is trying to discourage people from using options because the market is getting to be too efficient and thereby making it more difficult to make money. My feeling is that by trying to discourage people from using options, there will be fewer players which would lead to widening the spreads again leading to more money to be made by "they" that are still around. Sound crazy ??? Maybe, but how else can you explain NOMORE ??????

Vega:D

P.S. I promise not to make anyMORE comments or replies until NOMORE says something stupid. Tick tock, tick tock, tick tock..........
 
Quote from murray t turtle:

====================

For sure keep track of the time I am in the trade;
because as a buyer of options a long sideways trend will lose, unlike stocks.

:cool:

Chart/ tape book of the option index one trades helps losses & profits ;
may tighten up the stop % as time increases in trade, since i prefer medium time frame.
More...

Hmm, I use time loss as well for my long premium trades, but I dont adjust my stop loss based on it. In your experience Murray, what does that accomplish for you? I guess Im trying to understand why the stop loss as a % of the option's value alone , wouldnt take care of excessive time decay.
 
Quote from StillTrading:

Hmm, I use time loss as well for my long premium trades, but I dont adjust my stop loss based on it. In your experience Murray, what does that accomplish for you?


I guess Im trying to understand why the stop loss as a % of the option's value alone , wouldnt take care of excessive time decay.
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It probably would;
actually the ''Ultimate Trading Guide'' book is cover lettered '' short term trends.''

So have to modify it for medium term trends.

A disadvantage of it
is many people don't believe in trends;
& Professor Coin of the random walkers has some good points.
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:cool:

More Options;
Heard Mr. Cohen on CBN/ TBN, the negotiating king ,say recently ''You always have more options'':cool:

Repeat pattern ;
Mr. Cohen on CBN / TBN said ''You always have more options''
 
Quote from StillTrading:

Where stop loss orders are a big part of my risk management approach, I'm still not quite sure what is an "optimal" value for where a stop loss order should be set :confused: Is there any good books on risk management specifically for the derivatives crowd?

Currently I use a % loss from my cost per share , but I really don't have a real scientific approach to the whole thing...

Is there a formula for it like there is for early exercise? Maybe something based off the expected return? All suggestions welcome :D
More...

=====================
Stilltrading;
Moreoptions for scientific entry & exit include Vega's books and ;

Maverick74 takes something like a week.

I take something like 3 days or more [for more options] to scale in/out.
When you think about it;
its part of an effective form of focused diversification.

:cool: Luv learning-Solomon,trader king
 
Quote from murray t turtle:

=====================
Stilltrading;
Moreoptions for scientific entry & exit include Vega's books and ;

Maverick74 takes something like a week.

I take something like 3 days or more [for more options] to scale in/out.
When you think about it;
its part of an effective form of focused diversification.

:cool: Luv learning-Solomon,trader king
More...

First Id like to say thanks Murray for talking me through this very exciting topic :p
What is vega's book? And are you saying that Mav, scales in / out of his positions in a week (I.E. He takes 5 market days to scale in to a position. 5 days out. ). Im also alittle confused about what type of diversification this is providing :confused: Good Markets to All!
 
Quote from vega:

I don't even know what that is !!!!!!!!!!:p


Vega:D [/QUOTE

===
My Quote was ''Vega's books''- not Vega Book;
meaning the books /book writers that Vega mentioned in writing on page 1,not implying at this time Vega writes books
:cool:


The diversification principle includes option diversification in time;
not just different stocks/options.:cool:
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