Trailing Stops for Options?

Does anyone have any recommendations for how to use the equivalent of trailing stops for options? I'm aware that trying to set a trailing stop directly on an option can cause some problems due to the volatility, etc. Does anyone out there ever use some sort of contingent order based on perhaps a trailing equity "stop" that actually triggers the sale of the option?

For that matter, I'd love to hear how others deal with using the price of the equity to trigger sales of the associated options. With equities alone, I love trailing stops. But I just can't get my mind around a good system to semi-automate the selling of my option positions based on market movement. Any feedback would be appreciated!


Scott Sutherland

 

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ss;
I pay attention to underlying stock more than option;
sure, look at,record both prices.

Reasons include ;
stock data is usually more accurate,
bid /ask & volume is much better, precise for stocks.

And like today , saw someone pay up on a fairly liquid option &
wouldnt want to sell /buy based on someone overpaying for option. or panic selling.

 

Based on responses I've gotten so far (here and from others -- thanks you!!!), I'd like to get some ideas about what techniques people actually use to have stock movement trigger option sales. Do you use some percentage trail off the stock price to trigger option sale at market value? Do you just use stock price movement to trigger an alert and then make some decision about whether to sell? Are there some specific percentage price movements that seem to be best for preserving option value? Etc.

Thanks!

Scott

 

also, is there a way to implement this in IB TWS ??

i.e., use stock-price to trigger sale/purchase of option.

also, what about the case of unrelated issues?

i.e., using price of stock or index A to trigger transaction in option of stock B ?

in TWS...

thanks!

 

Yes, Our conditional orders and Alerts enable you to do this.

 

thanks Steve....I'll invest the time in some study of the 'manual' then.

by the way, where are the PREM's ??

(premium over cash, for index-futures)

I think they've been requested for several months; and are readily available from several data-sources. Shouldn't be awfully difficult to get them working.

it's a real shame that they're not available as a standard symbol/dataline within TWS; so that it can be used as a trigger, used by programs like QT, etc..

thanks again

 

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Yes,yes ; end of day prices help much;
but some other things need to be worked out individualy.