Hey i want to test short butterfly spreads and i don't like using demos cause demos are good for a general idea but not for the actual trading so i checked on the spx if i short it one week out (butterfly spread) and it expires out of the money i make 600$ and can lose 1800$ so i would ask you guys how would you set up a stop loss if lets say a total portion loss of 200$ on the net of the position but then if the market is volitile or maybe if the underlying hits a number just want to know if there is any good stop loss out there thanks
You’ll just get taken out of good trades at -200 often sadly, I’d stick to monitoring and manually exit if there directions changed. Also most big moves happen in pre trade, so it’ll open at -1000 and then close the position. Adjust your size down maybe so you can survive a few hits. Defo no holding over major news. I only shorted calls, 1 SEC event can cause major drop, rare for the opposite spike up, where as puts would sky rocket.
Stop orders in options are very dangerous. Stop orders in spreads are worse. SPX markets are wide, so if your broker does accept a stop order, it can be triggered from wide markets. IMO, a $200 stop loss in SPX is too tight. If you can't handle a $200 loss from a single spread, I suggest SPX is too large a contract and you should try SPY. I would avoid stop orders is that option too. Bob
You are sitting in an open-wheel race car and asking which pedals to press. The best advice here is to GET OUT OF THE CAR. Your ability to press a mouse button does not qualify you to play with tools and markets that will suck your capital away from you so fast that your head will spin 'round and 'round on your shoulders, before you realize what it is that happened and what you *could*have* done about it. It will be too late. NOT trying to be mean here.....
your right but you can point me where to look at , and not say get out of the car cause at the same time you wrote this you could have written an answer also. but anything is good
the problem with all stops in general is that they will reduce your probability of profit. You can have a really tight stop and so you will have many little small losses and a few bigger winners, or you can set wider stops so you will have fewer bigger losses. There is no clear answer because it's always a trade-off. What about not having a stop at all, but getting out as soon as your assumptions about the market change?
ive been checking out selling a butterfly on the spx on the weekly maybe ill start on the spy but i don't have time to check it every day just 2/3 times a week that's why im looking for a weekly strategy that works most of the time