A couple of weeks ago, I did a blog about a few of my favorite option sayings. In this post, I will add three more to the list and briefly try to explain what I mean. If one of them strikes a chord with you, then it was well worth it because each one has certainly improved my option trading.
If You Get a Big Move in Your Direction…
If you get a big move in your direction, you need to do something. What I mean by this saying is fairly obvious. If you get a big directional move that favors your trade, you need to do one of two things or both. The first is take some profit if applicable and don’t be too greedy. The second is to move your hard or mental stops up to either lock in some gains or remove risk by bringing the stop up to breakeven. Of course it is good to mentally remove risk. Generally, when I get a bigger move than expected, I do both: take some profit and move my stop loss.
Throw a Target Out There
This is something I practice on virtually every option trade I take with the only exception being a longer-term time spreads. When I initiate a new or have an exiting position, I enter a profit taking order with either a buy or sell limit. This instructs my broker to exit the position if my designated profit is realized. We have this discussion often in Group Coaching and I tell traders that even if you are watching your positions, it makes sense to have a limit order standing. Sometimes the order will fill when you don’t even realize it!
If You Are Down More Than You Expected to Be…
This is a saying that may not make sense at first, but the more you trade, the more it probably will. This is a saying I have derived from being in this situation too many times as a new options trader. Essentially, I am saying that when your position is down more than you had accounted for and you are fortunate enough to get back to breakeven or close, exit the position. Pretty much it is saying that you were fortunate and lucky to get back to being flat; don’t push your luck anymore and be happy. This has served me well in the past and currently.
These were just a couple more of the sayings I like to use myself and through my teaching. Feel free to use them and claim them as your own. I just want to help. Have a Healthy and Happy New Year!
John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.
