The 50% Stop-Loss Rule That Saves Your Option Premium

Don here...

Jeff Bierman's shorts are crushing it. His account was flat today while the S&P dropped 52 points.

Flat.

That happened because his short call spreads on Coke, Sysco, and Walmart are outstripping his longs by deltas. He walked through exactly how he builds that hedge and the stop-loss framework that keeps him in the game.

This is part three of a five-part stop-loss coaching series. Today covered stops by integer and stops by percentage loss on stocks, futures, and options.

In today's Live Trading Room session replay, you'll see:

How to calculate stop-loss levels using channel magnitude instead of support resistance. Jeff used Pepsi to show how averaging the dollar distance of previous flag formations gives you a precise integer stop. The stock makes $8 quantum leaps per channel. That number becomes your exit trigger.
Why a 5% stop on futures can wipe out $5,000 on a single contract. Jeff broke down the S&P futures math. Every point equals $50. A 100-point range means $5,000 at risk. His max tolerance is 10 points per contract. You will learn how to calibrate integer stops to actual dollar exposure.
The 50-55% option spread exit rule that preserves salvage value. On a $3 wide Coke spread sold for $1.30, Jeff's max risk is $1.70. If the spread moves to $2.00, he covers and salvages a dollar. He took you through the exact math on when to eat the loss versus roll.
Why he exited Lululemon at 164 before earnings and is looking to buy it back. The expected move was $15. Jeff refused to hedge that risk. He sold, the stock dropped to 156.64 this morning, and now he sees a turnaround setup with accumulation distribution signaling short covering.

Jeff covered Bank of Hawaii today. The option was worth one penny. He took it off because sitting on a penny of premium while exposed to buyout risk makes zero sense. Every Genesis COG member was short that name, and he told them to cover.

Tomorrow is part four. Stops by moving average violation.

→ Watch Jeff's complete stop-loss methodology for stocks, futures, and options with real trade examples from today's session

To your success,

Don Kaufman
Chief Market Strategist, TheoTRADE

P.S. This is your last chance. Register now for Don's 0DTE webinar tomorrow at 1PM EST. Space is limited.

Click Here to reserve your spot.

Helping You Become a Better Trader...it's What We Do. Experience TheoTrade® Today!

Whether you are a beginning, intermediate, or active trader, you will find a treasure chest of valuable trading education resources, both free and paid, that will help take your trading to the next level. We are committed to helping you become the best trader you can be.

Disclaimer: Neither TheoTrade.com or any of its officers, directors, employees, other personnel, representatives, agents or independent contractors is, in such capacities, a licensed financial adviser, registered investment adviser, registered broker-dealer or FINRA |SIPC |NFA-member firm. TheoTrade does not provide investment or financial advice or make investment recommendations. TheoTrade is not in the business of transacting trades, nor does TheoTrade agree to direct your brokerage accounts or give trading advice tailored to your particular situation. Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction or investment.Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past Performance is not necessarily indicative of future results.

TheoTrade

PO Box 24790 Christiansted, Virgin Islands 00824
1 (800) 256-8876

support@theotrade.com

Want to change how you receive these emails?

You can Update your preferences

Theotrade.com | Privacy Policy