Stop loss sell based on stock price

Discussion in 'Options' started by tenebre, Sep 29, 2009.

  1. tenebre


    Apologies if this has been asked before..

    Lets say if I buy 10 calls of XYZ at limit order of $1.00 and according to my TA, I would like to exit the position and sell my calls if the stock drops below $30.. how can I enter this as a stop loss?

    Right now I'm using optionsxpress Virtual Trading platform..

  2. You should be able to sell the options via a market order (and market orders are ALWAYS a bad idea when using options), using a stop-loss on the stock. An OTO (one triggers the other) may be appropriate, but it depends on your broker's limitations.

    The broker will tell you how to set it up - but essentially it's this:

    "when the stock triggers the stop, initiate the order to sell my calls at the market."

    If you can make it work for a limit order, that would be good, but you have no way of knowing what the limit prices should be - and it will change over time - due to theta decay.

  3. The only way is:

    Buy just 1 share of XYZ
    place a stop loss on XYZ
    Place one-triggers-other order to sell your option, once the XYZ stop loss is activated.
  4. tenebre,

    If you use OptionsXpress, they have what they call "Contingent Orders".

    I don't know if they have it or not in the Virtual Trading however, as they don't always have all the real features in there.

    All you have to do is place a market (or limit) sell order on the Options, but then in the "Advanced Orders" drop-down, select "Contingent order". After you click Preview Order, you will then get another dialog where you can select for example to place the order if XYZ is less then 30.00 - you can select based on Price (bid/ask or last), Time or Volume being More or less then any number you specify and you can also select a time slot if you want to.

    You can also do that to open an order, so if you have an OptionsXpress account, you can try it out to see what it looks like by placing an opening order (just don't go through all the way to confirming of course).