Thanks for the psych lesson and encouragement, Dan. Made a couple of undisciplined options trades in AAPL before joining OMM and took a bigger loss than I am comfortable with.
Lesson 1 – I’m getting better with defining my risk in stock trades, but was horrible with this with my option trades. I’m looking for a better way to do this. I have a new idea and would like the people in the forum to comment:
If I see a stock I like and determine I’d enter the trade and set a stop $1 below my entry price, I’ve now defined my risk. If I were to do this with options, I’d use the delta (let’s say it is 0.60) to determine that the same $1 risk in the stock would be a $0.60 downside risk in the option. I would then have to determine if I am comfortable risking that $0.60. If so, I’d enter the trade and set a stop $0.60 below my option entry price.
Sounds like this should work, but I’d really like some people to LMK what they think. Am I missing something fundamental here? What risks are there with this strategy? What am I missing?
Dan
just listened to your video from this morning. GOOD STUFF!!
Dick Mast
Thanks for the psych lesson and encouragement, Dan. Made a couple of undisciplined options trades in AAPL before joining OMM and took a bigger loss than I am comfortable with.
Lesson 1 – I’m getting better with defining my risk in stock trades, but was horrible with this with my option trades. I’m looking for a better way to do this. I have a new idea and would like the people in the forum to comment:
If I see a stock I like and determine I’d enter the trade and set a stop $1 below my entry price, I’ve now defined my risk. If I were to do this with options, I’d use the delta (let’s say it is 0.60) to determine that the same $1 risk in the stock would be a $0.60 downside risk in the option. I would then have to determine if I am comfortable risking that $0.60. If so, I’d enter the trade and set a stop $0.60 below my option entry price.
Sounds like this should work, but I’d really like some people to LMK what they think. Am I missing something fundamental here? What risks are there with this strategy? What am I missing?
thanks, that video really helps, kinda gave me a wake up call reminding me how should i be approaching the market!
I bought, T, BTU, CLF, First time made money on my option trade.
thanks.
Yong.