Well, that’s my theory as well - reduce position size instead, but I was surprised how large the DD was and how long it took to recover compared to stop loss method. Granted, we may never see 2008 equivalent in our lifetime.
only Stops if your Selling ie shorting options, otherwise I've had them go to near Zero then back to 500% profit on some SEC news over night
How does a stop fit into an option position? Could you provide an example? I am referring to US equity options - which is 99% of the discussions on these forums.
unless you are perfect in your market read-or you trade options- you need a stop. stops fix your loss and what you pay for the option fixes your loss, should it occur it took me 13years to get my read correct and i lost money all 13. that is quite a high price to pay. and even if you are perfect, in your market read, you need a wide stop .....what is called a catastrophic stop: to stop a 9/11 type of black swan from wiping you out. you can only read what is already written and the market can change on a dime
If you are keen in a perspective from Euan Sinclair, author of several well known options trading books. He has a PhD in Physics. https://blog.quantinsti.com/hidden-truths-stop-loss-trading/