Registered: May 2002
05-12-08 08:26 PM
Quote from c.chugani:
What would you do if your 2-3% stop on the short stock position is hit and immediately later the stock price falls again - all before the option expiry date?
You would have covered your stock position but would be left with a naked put..
would you cover (or place stops) on the option position as well? If so, aren't you faced with a possible double loss (ie. buying both stock and options at higher prices than you had initially sold)?
Once again, thanks for your time.
Good question, I generally enter into and exit out of covered trades first through the option leg of it due to liquidity issues.
I try to sell on the ask and buy the bid even with options.
If a trade has gone against me over 2% I start looking to get out or at least look at it and see if I want to get out. I don't have a fast and hard rule on stop losses.
Of course in a fast moving market it can get costly to try to get out of both a stock and the options.