For example, during Fed announcement as the market briefly dipped hard my iron condor position in RUT got stopped out. This was due to the crazy and brief wide spread on my options. Of course everything swung back and had I not been stopped out I would have been fine. Any suggestions to avoid these crazy spike stops? Avoid stops? Other options? I use TOS and usually set my stop loss points based on the mark price.
What's best way to avoid being stopped out during wide swings?
- Thread starter GarrettKimmel
- Start date
Place the trade after the news, not before.
Using physical stops is giving free money to the market, especially with options.
Use mental stops and be disciplined.
CM
This or change up your stops.
You should never be concerned about this. When your stop is hit, you don't know when it's "excessive volatility noise" or the start of "something big". All you should be concerned about is, "the market showed the potential to destroy me (rightly or not), and I didn't let it... with my stop".
"Setting stops" is both an art and a 2-edge coin. Loose stops lead to fewer but larger losses when hit. Tight stops lead to more frequent losses, but smaller. No pat answer. Your pick.
Last edited:
Stops should be considered as "lines in the sand" that if crossed means you are committed to some "irreversible? action". -- "The sky is falling" trigger.
1) You drew you line in the wrong place, if you did not want this to occur.
2) Stops on Options, such as RUT (as well as most) are seldom (perhaps never) going to get you a fair price.
One approach would be to structure your positions to allow you to make a "relaxed" response to market changes. For example, to allow for this on my RUT position for the FOMC meeting, I added a deep OTM PUT, should RUT go down hard&fast, then took it off the following morning as my insurance.
1) You drew you line in the wrong place, if you did not want this to occur.
2) Stops on Options, such as RUT (as well as most) are seldom (perhaps never) going to get you a fair price.
One approach would be to structure your positions to allow you to make a "relaxed" response to market changes. For example, to allow for this on my RUT position for the FOMC meeting, I added a deep OTM PUT, should RUT go down hard&fast, then took it off the following morning as my insurance.
1) Never use stop orders with options.
2) Stop trading iron condors.
2) Stop trading iron condors.