Hi All I typically only buy call and puts. I ran into an issue with AAL. I took at a call at 16.5 for 1.28 exp on July 10. I thought I put in my stop loss but I missed it or something happened and it did't trigger. AAL is now trading at 12 ish and the contract is worth .05 to .10. If i roll what are my options. Can i roll it and sell a put for the credit let say for aug 7th at a strike at 12? Or does the roll have to be the same as the original purchase. I;m looking for all suggestions to get myself out of this hole I'm in now. Thank you in advance for your help. Jason
My advice to you is take the loss, learn from it, and move on. You don't want to be one of those guys who enters a trade(key word "trade") and makes a career out of it. Do you?
Yeah, take the loss. Stop losses on options are impractical because of the wide bid and ask spreads of the options prices. Use mental stop losses and have the discipline to stick to it. Also, use proper position sizing to further limit your losses. Risk no more than 2% per trade.
IMHO, essentially when you roll you decide to close out your trade at a loss. The way I look at things is if the second trade is one I would make (ignoring the existing position) I trade, be it a put or a call. Often I leave the first alone. Why? The calls and puts I own have their natural stops, the risk:reward are built in, I already paid for theta why not let it plays out? In summary, don't focus on the contract that has $0.05 left, focus on the new one to see if that one makes sense independent of the first. Sorry I am not giving you a recipe because I don't trade AAL and have no idea if I should do another call or put, only you can determine that.
You know, in these situations, it's most often worth changing an asset to start over, without too much emotion. Why didn't the stop-loss work? Could it be some kind of problem with your broker? Actually, slippages, etc. should be rare, and ideally they should be absent at all. So if you constantly face such problems, then you should definitely think about changing your brokerage company, you should work in comfortable conditions for yourself, because only then you will be able to realize your potential and cope with your tasks and goals. And in general, do not be upset, there are different events and situations on the market, which can take away your balance. But you will be able to cope with all the trials.
Accept this loss and learn from this. Your entry and exit positions are of much importance. Always pay much attention to your positioning size. Never take too much risk that you cannot afford.