Yeah, I know. I've been using them for my stop loss orders. Wasn't sure if there would necessarily be an advantage setting trailstops based on the underlying. I thought that with trailstops on the ask price, I could calculate how much of my profit I'd stand to lose.
Not necessarily for options. Some margin sounds more realistic. Another thing is that options on stocks below $10 can sometimes fly out of control.
SM is trading at 42.50. But I've seen what you mean after a couple of recent purchases... have resolved to stay away from the sub $10 stock.
These days, a stock at just about any price can fly out of control. The volume of the stock is more determinate of how out of control the stock gets. The reason it is seen more with stocks under $10 is because they are usually thinly traded. There are a few companies that are heavily traded that trade around the $5 range and they rarely experience big swings because they trade >30MM/day. When a stock is thinly traded, it doesn't take much to make it swing wildly. The 3 big options brokers (ToS, OX, IB) all allow conditional orders. You can base them on the bid, ask, or mark and it won't make much difference. I never trade options on a stock that doesn't trade more than 1MM/day. More important however is the option open interest. At the strikes that I am trading I must see >1,000. I wouldn't say that you should close out your positions everytime you'll be gone, but I would make sure those positions are in heavily traded issues. The risk is too high on thinly traded issues. Remeber, even the most liquid options are still vulnerable to gaps.
I'm really interested in trying a credit spread. INFY trading at 75. Potential $5 gap to be faded. ADV 750,000. Contender for a bull put spread?
Problem is that I am unsure that it will fade that gap. We didn't get a really strong bounce from the market coming back from that huge drop Friday. There is strong resistance at $75 historically. If it breaks through that resistance it should be able to fade the gap, but it has to go through the 50- & 20-day MA to do it. I would be more likely to play this one down because if it started to fade the gap I would be able to buy back the short calls and use the long calls to fade. One thing to remember, a huge majority of stocks fade the gap the very next day. A large part of the ones that don't, never do end up fading.
There's the recovery I was looking for. Hope everyone made money like I did today. Had to lock in profits on some of my FEB spreads.