Win % and Stop Loss on Options

Discussion in 'Options' started by HtownTrader, Nov 8, 2018.

  1. 1. What % of trades do you strive to win, and what % do you actually win? And do you have a formula for trying to limit your loss to a certain percentage and then have your gains outweigh those losses?

    2. Do you use stop-loss orders if you only trade options, and if you do, what % do you set it at? I am experimenting with 2 scenarios: 40% stop-loss on orders while being more selective, or being a little less selective, knowing I might lose more trades, but lowering my stop-loss to 20%. Any ideas?
  2. gaussian


    Win/loss percentage is a naive way to look at trading. You should really be looking at total return vs total risk. You can win a lot, but if your risk management is bad you could end up giving it all back in a few losses.

    Stop losses are often difficult to place on complex options positions. In the event of earnings events you'll find yourself being forced to hold through the night anyway. I would be interested in hearing how people manage stop losses on complex options positions. I've been doing it manually since they rarely become emergencies very quickly. I've never had a problem getting out of a spread or something before it got too bad. I could see however single leg options going bad fast. Stop losses on those work much like stocks.
    sle, guru and comagnum like this.
  3. KeLo


    Your question shows that you have much to learn about options trading. That's OK, we were all newbies once. A good all-around book that I recommend is Options as a Strategic Investment, by Larry McMillan.

    Also see:

    There are many free options trading courses on YouTube. Caveat Emptor. Not all "gurus" are competent.

    Good luck. :)
    Last edited: Nov 9, 2018
  4. expiated


    I trade Forex, not stocks or options, so perhaps my experiences are not really applicable to your question, but when I was scalping currency pairs (over two years ago) I was striving for and actually attaining a daily win rate north of 90%.

    Because the percentage of successful trades was so high, I was able to get away with a 3:1 risk-to-reward ratio (if you want to call that a formula for trying to limit my losses to a certain percentage and then have my gains outweigh those losses).

    Over the last two years I have been re-engineering my system to resemble more of a pseudo-swing approach to trading. Major modifications were not finalized until approximately three weeks ago, and the final touches were not incorporated until maybe three days ago.

    During that time, I initially just wanted to get my daily success rate up above 50%. But that was quickly changed to 60%, and then upped to 70%. Now that I've reached that goal (see below) I have my sights set on 80%. (Presently, my average losses are about 50% greater than my average gains.)

    ScreenHunter_2529 Nov. 09 16.55.jpg
    I'm not counting on returning to the 90% daily success rate I experienced as a scalper, but should that happen, it will be icing on the cake.