To stop loss or not

[deltaf0rce]

• How does a stop fit into an option position?
• Could you provide an example?

I am referring to US equity options - which is 99% of the discussions on these forums.

You’re not talking about trading options, you’re talking about buying lottery tickets. Don’t make statements you can’t back up.

Either- 1, above, and just found out at robinhood last week in Tesla that volatility is a real thing

2, use it to hedge a position at which point you’re using them as risk management and have considered how to place them against a stock or portfolio, through delta and other Greeks and hedge metrics

or 3, you’re speculating with proper structure at which point the option IS the position and you either should be spreading, trading in and out as appropriate or offsetting as needed with synthetics.

people come here to learn. Please respect that.

 

[sef88]

Have you seen filthy rich scientists and so called experts trading and getting rich in the stockmarket? I have not either. If these BS artists believed their studies, they should trade it and make millions and become filthy rich. Why don't they? Then, they can crow about it. Ignorance is bliss. Stop losses protect your capital, profits, allow you to enter just at the right time, most times. That said, it is not a stand alone system. A trading system should have risk management which includes, position sizing. That alone will cut your risk, coupled with the stop loss. The only thing you have control over is your risk in the stockmarket. You do not know how much you will earn ahead of time. Cut your losses and let your profits run. Of course, the so called experts have no clue on how to do it!

How about Jim Simmons, Robert Mercer, Kenneth Griffin, Edward Thorp?

 

[smallfil]

How about Jim Simmons, Robert Mercer, Kenneth Griffin, Edward Thorp?

Jim Simmons is a hedge fund manager not a scientist. None of the so called scientists have put their own monies at risk and none of them have become millionaires in the process. There is space for statistical studies but, a tool when misused is useless. Simple as that. To simply say a stop loss for practical purposes is dumb as hell coming from people who do not trade the stockmarket. I am a trader who uses my own monies so, utter BS will not put monies in my pockets. If I were to follow these so called experts, I would only lose my monies.

 

[jbt]

Jim Simmons is a hedge fund manager not a scientist. None of the so called scientists have put their own monies at risk and none of them have become millionaires in the process. There is space for statistical studies but, a tool when misused is useless. Simple as that. To simply say a stop loss for practical purposes is dumb as hell coming from people who do not trade the stockmarket. I am a trader who uses my own monies so, utter BS will not put monies in my pockets. If I were to follow these so called experts, I would only lose my monies.

How about Jim Simmons, Robert Mercer, Kenneth Griffin, Edward Thorp?

Renaissance does not use price stops - but time stops and sizing

 

[Bomp]

Jim Simmons is a hedge fund manager not a scientist. None of the so called scientists have put their own monies at risk and none of them have become millionaires in the process. There is space for statistical studies but, a tool when misused is useless. Simple as that. To simply say a stop loss for practical purposes is dumb as hell coming from people who do not trade the stockmarket. I am a trader who uses my own monies so, utter BS will not put monies in my pockets. If I were to follow these so called experts, I would only lose my monies.

Jim Simmons has a Phd from Berkeley and a BS from MIT. He is the quintessential scientist-to-trader example.

 

[longandshort]

You really want to reduce drawdowns, which is more of a portfolio issue than a single security issue. On a single security you may have a point at which you are "wrong" and exit. If you do not do this then you'll never improve your trading skill.

To manage drawdowns, reduce exposure across the board to free up capital around macro (non-thesis driven) events. E.g. if you are betting on stock X beating earnings, and today SPX is down 5%, reduce position sizes across the board to free up capital. (Ideally you do this when VIX hits certain levels or moves up a certain %).

For single security positions, incorporate scenarios -- e.g. if stock X misses earnings it'll fall to price Y, if it beats, it will move to price A. At price Y the option is worth $0.20, at price A it is worth $2.00. If during this week the option fluctuates between $0.80 - 1.60 there is no need to exit. Your benchmark price to exit if you are wrong is $0.20, so you are happy with any price above that if wrong. Your benchmark price to exit if right is $2.00 so you are happy with any price above that if right.

 

[padutrader]

Not really true. I use stops nowadays but that's because my positions are large. If your position is say 4% or less of your total net liq, even a 100% loss won't be catastrophic. Granted it can go over 100% with shorts but how often?

yes of course that is why i too nver used stops

but a novice trader does not have the experience to withstand a drawdown of that size and you are forgetting the emotional stress of seeing a position go against you for along time.

of course you can argue that you are eventually correct always...if you hold till it falls 100%.

so i feel it is practical for novices to have a stop and only a novice will ever ask a question to stop or not.

 

[padutrader]

If these BS artists believed their studies,

what do you need to study?

if market goes up corrects and then breakout again.... you have a trend...buy and if it breaks or goes below the correction, reverse.

anybody who does research/studies is an idiot......i know this from personal experience because i did that for decades.

now i study no more....... just laugh to the bank

 

[smallfil]

what do you need to study?

if market goes up corrects and then breakout again.... you have a trend...buy and if it breaks or goes below the correction, reverse.

anybody who does research/studies is an idiot......i know this from personal experience because i did that for decades.

now i study no more....... just laugh to the bank

Was referring to the scientists claiming stop losses are useless. I will continue to use stop losses coupled with position sizing. It would be utterly dumb not to protect your capital and profits if any.

 

[padutrader]

Was referring to the scientists claiming stop losses are useless. I will continue to use stop losses coupled with position sizing. It would be utterly dumb not to protect your capital and profits if any.

yes i use a wide stop

since a tight stop make me nervous but like i said if the market goes below a pull back i reverse


i was referring to study as a whole and the jokers like elliot wave gann fib order flow