
Start Here
Platform

Tour
Bots 101How it worksLive demo
Tools
Automated tradingOptions backtestingWatchlist scannerPrivate community
Use cases
New investorsStock tradersActive tradersPassive investorsSwing tradersAlgorithmic traders

Templates
By trade type
Stock trading botsOptions trading bots
By strategy type
Bullish options strategiesNeutral options strategiesBearish options strategiesHedging strategies
By style
Active and high frequency botsEvent-based botsTrend trading botsMomentum trading botsStatistic and probability-based botsTechnical analysis botsEarnings strategy bots

Integrations

Pricing
Education

Courses
Overview
By experience
Beginner
What is an options contract?Stock trading vs. options tradingOptions contract specificsCall vs. put options basicsBuying options vs. selling optionsOptions profit and loss diagramsOptions pricing tablesOption moneyness (ITM, OTM, and ATM)Options pricing and the "Greeks"Options expiration and assignmentWhat's our "edge" trading options?Single vs. multi-leg options strategiesSmall account options strategies
Intermediate
Fearless, confident options tradingHistorical volatility vs. implied volatilityPredicting market movesTrade size and capital reservesPortfolio balance and beta weightingHow to choose the best options strategyHow far out to place trades?Strike price anchoring with probabilitiesTips on getting your trades filledAdvanced and contingent orders7 step options trade entry checklist
Advanced
Developing a daily trading routineHow to avoid "Black Swan" eventsAdjusting and hedging option tradesExiting options trades automaticallyOptions strategies we don't adjust (and why)Big picture adjustment strategyWhen to adjust or notAdjusting straddles and stranglesAdjusting credit spreads, iron condors, and calendarsSmarter stop-loss ordersBuilding a diversified options portfolioRolling options trades for duration and premiumOptions expiration week position checklistDealing with stock assignment and dividendsHow to free up trading margin and cash
By subject
Options basics
Why options vs. stocks?What is an options contract?Smart use of leverageOption strike priceOption premiumOption expirationOption contract multiplierProfit and loss diagramsLong call option explainedShort call option explainedLong put option explainedShort put option explainedATM, ITM, and OTM optionsCash vs. margin basicsHigh probability trading definedHow to buy a call optionHow to buy a put optionSingle-leg vs. multi-legWhat is the VIX?Is fundamental analysis dead?
Entering and exiting trades
Game of numbers7 step entry checklistStrong liquidity examplesPicking the next directionScanning for tradesOption pricing table basicsSetting up your trade tabPinning your probability of profitUsing delta for probabilitiesBuy to open vs sell to openBuy to close vs sell to closeMarket, limit, stop loss orders5 types of contingent ordersLimit ordersMarket ordersLimit on close ordersMarket on close ordersAdvanced contingent ordersTaking profits before expirationMechanics of rollingConsider future events
Options expiration
Options expiration explainedWhat is the Options Clearing Corporation (OCC)?Physical vs. cash settlement optionsAmerican vs. European style optionsWeekly options expirationWeekly expiration tags/codesOptions assignment processOptions exercise processTrading timeline (duration)
Bullish options strategies
Bull put spreadBull call spreadLong callShort putBull call backspreadPut broken wing butterflyCall calendar spreadPut diagonal spreadCustom naked putCovered callSynthetic long stock
Neutral options strategies
Short straddleLong straddleIron condorsShort strangleLong strangleIron butterflyUnbalanced iron condors
Bearish options strategies
Bear call spreadBear put spreadLong putShort callBear put backspreadCall broken wing butterflyPut calendar spreadCall diagonal spreadCustom naked callCovered putSynthetic short stock
Portfolio managmeent
No guaranteed tradesDon't do something, sit thereAccount size adjustmentsAvoiding stock market overloadStocks, indexes, & ETFsMonitoring positionsCreating automatic alertsIndividual stock betaPortfolio betaBeta weighting your portfolioUncorrelated industries/sectorsSystematic vs. unsystematic riskEfficient portfolio frontierLimiting undefined risk tradesEconomic calendarConcept of legging
Options pricing and volatility
How to find option price quotesUnderstanding the mathIV vs. IV percentileProbability of profit vs. probability of touchOption probability curveBid-ask spread definedIV expected vs. actual moveThe "Greeks"Fatal pricing errorsInverse ETFsOptions parity
Adjusting trades
#1 adjustment for any tradeWhen to adjust a tradeSingle options trade vs. overall portfolioLeveraging the analyze tabCall spread adjustmentsPut spread adjustmentsShort strangle adjustmentsIron condor adjustmentsShort straddle adjustmentsCalendar spread adjustmentsDebit spread adjustmentsButterfly adjustmentsUsing stop lossesDelta hedgingRolling positionsPairs hedging

Strategies
Long callLong putShort callShort putCovered callCovered putProtective putCollar strategyLEAPSBull call debit spreadBear call credit spreadBull put credit spreadBear put debit spreadLong straddleShort straddleLong strangleShort strangleCall calendar spreadPut calendar spreadIron condorReverse iron condorIron butterflyReverse iron butterflyCall butterflyPut butterflyStrapCall diagonal spreadPut diagonal spreadCall ratio spreadPut ratio spreadCall backspreadPut backspreadLong box spreadShort box spreadReversalStock repair

Topics
OverviewAsset allocationAutomated tradingBehavioral financeBrokersCandlestick patternsChart patternsDividendsEconomic indicatorsEquity investmentsExercise & assignmentFinancial analysisFinancial historyFinancial marketsFinancial modelingFinancial theoriesFundamental analysisFuturesInvestment accountsInvestment taxesInvestor biasesMarket holidaysMarket hoursMarket indexesMarket indicatorsMomentum tradingOptionsOptions pricingOptions settlementPortfolio managementRisk managementStocksStock marketTechnical analysisTechnical indicatorsTrading commissionsTrading platformsTrading psychologyTrend trading
Resources

Workshops

Podcast

Blog
Support

Help Center
Overview
Getting started
What is a bot?Creating a botAutomation typesAutomation editorBot dashboardBot positionsBot logTemplates and cloningKey conceptsSafeguards and limitsPower of botsBest practices
Bot automations
What is an automation?Scanner automationsMonitor automationsEvent automationsEditing automationsReusing automationsCopying automationsOrdering automationsUsing custom inputsBot level inputsAutomation statusesAutomations library
Bot actions
DecisionsOpen positionClose positionNotificationsLoop symbolsLoop positionsBot tagsPosition tags
Bot examples
Genesis 1.0 botGenesis 2.0 botGenesis 3.0 botTrend trading with stocks botPortfolio trend trading botTrend trading with options botMultiple moving averages botTechnical swing trading botTrend and momentum botWeekly credit spread botRecurring iron condors botThe "Honey Badger" botHybrid spreads botHigh IV rank iron condor bot
Decision recipes
Comparing underlying symbol priceEvaluating symbol typeComparing underlying symbol propertiesEvaluating underlying symbol performanceEvaluating underlying symbol standard deviationComparing underlying symbol price to an indicatorComparing multiple underlying symbol indicatorsEvaluating underlying symbol implied volatility rankEvaluating underlying symbol earnings reportingEvaluating underlying symbol price probabilityEvaluating underlying symbol probability within rangeEvaluating bot propertiesEvaluating bot available capital for opportunitiesComparing bot position count to position typeComparing bot position count to underlying symbolEvaluating bot position count to position type and underlying symbolEvaluating bot last position activityEvaluating bot last activity with underlying symbolComparing bot active orders statusComparing bot active orders status with underlying symbolEvaluating bot position availabilityEvaluating bot tagsEvaluating opportunity availabilityEvaluating opportunity return expectationsComparing opportunity attributesComparing opportunity leg attributesComparing opportunity bid-ask spreadEvaluating opportunity probabilitiesEvaluating position performanceComparing profit target to trailing valueComparing position time to expirationComparing position durationEvaluating position underlying symbolComparing position propertiesComparing position leg propertiesEvaluating position typeEvaluating position sideComparing underlying symbol price to position legEvaluating position tagsEvaluating underlying symbol indicator propertiesComparing multiple underlying symbol indicator propertiesEvaluating MACD technical indicatorComparing Bollinger Bands to symbol priceEvaluating stochastic technical indicatorComparing VIX propertiesEvaluating market time of the dayEvaluating days of the weekEvaluating bot switches
Position statement
Activity summaryPosition detailsTrade detailsOpened positionsClosed positionsCanceled positionsOverride positionsExpired positionsPosition historyManually open positionManually close positionImport position
Order pricing
SmartPricingFinal price settingsPosition summaryOrder detailsWorking ordersManual override
Bot templates
Creating new templatesUpdating existing templatesDeleting templatesSharing templatesUpdating shared templatesTemplate best practices
Cloning bots
Cloning existing botsCloning from templateCloning from shared template
Troubleshooting
Using bot logsTesting your botsNot enough capital warningDaily position limit warningTotal position limit warningPricing anomaly warningMissing or invalid input errorDaily symbol limit errorExcessive errors failsafeOverlapping strikes failsafePrice exceeds strike-difference errorOptions expiration protocolDuplicate orders errorOptions approval level errorBot event loopsStock splits and corporate actionsSupported browsersSupported countries
Community forum
Community guidelinesCrafting your introductionSending group messagesSending private messagesAttaching bot templatesReceiving bot templatesAttaching automationsReceiving automationsFollowing tradersPosting publiclyEditing posts and messagesSubscribed discussionsUsing bookmarks
Using backtester
Running a new backtestBacktesting results summaryModifying existing backtestsMy backtestsBacktesting research databaseTop backtestsBacktesting errors
Account settings
My profileTrading accountsConnecting to TDAmeritradeConnecting to TradeStationConnecting to TradierIncompatible accountsPassword managementSession timeoutTwo-step authentication
Technical docs
Infrastructure and securityAutomation structureAutomation behaviorData feedsOrder handlingTrade enforcementsBroker rejection errorsBot limitationsProfit and lossFair value pricingDecision propertiesDecision calculationsParameter selectionCalculating probabilityPlatform indicators

Contact
Send FeedbackReport IssueEmail Us
Option AlphaOption Alpha

LoginFree Trial
BlogStrategic ThinkingWhen to Hold a Position Before You Cut Losses

When to Hold a Position Before You Cut Losses

When should you hold a position and when should you cut losses? Learn to control your emotions and exit trades before they become big losers that blow up your account.
When to Hold a Position Before You Cut Losses
Kirk Du Plessis
Apr 2, 2021
•
3 min read





Rationally deciding to exit a position and cut your losses is extremely difficult.

As humans, we naturally have a fear of losing and closing a losing position only reinforces that fear. Unlike winning trades, losing trades have a great impact on our emotions.

This could be the #1 reason we tend to hold onto a losing position far longer than we ever should have.

We think that magically the market will reverse, and our losses will turn into gains. And until we close the position, we haven't lost money yet.

Oh, the tricks we play on our minds!

Know When You Should Have Already Exited

In my opinion, if you start to second guess and question the position you should have already been heading for the exit doors.

Typically those "feelings" you have deep in your stomach will try to keep you in the position as you think to yourself, "It will turn around soon."

How long should you hold on then? Only long enough to realize that the investment is not going to turn around. When you hope and pray more than anything else, you should hit the sell button.

Remember the 14 stages of investor emotions? It's the same cycle that's played out time and time again with each of us. But I would rather see you live to fight another day.

Take the loss and make adjustments for the future.

Forget What Happens After You Get Out!

Sometimes after you exit a position, you'll watch it turn around and do exactly what you "thought" it was going to do. This is horrible for traders - beware!

When we see this happen we naturally think to ourselves that we were wrong, and we knew it was going to turn around. We kick ourselves in the head and swear up and down that next time we'll stick to our guns.

Don't fall into for this trap! This is horrible habit to get into because the next time could be the last time you trade if you blow up your account.

Whatever happens after you exit is a clean, fresh slate. You made a rational decision to exit (I hope), and now you have to re-analyze the market.

Remember, if you are focusing on high probability option trades, you know that eventually you'll have winning trades that will more than overshadow a couple losers.

Learn From Your Mistakes, Keep Moving Forward

There is no right or wrong answer here, but only the lesson: at some point bad trades will occur. Recognize them early and get rid of them. Keep making trades and learning from past mistakes.

The best traders know that hedging early and often saves thousands of dollars each year.

Sure you'll give up a little profit to protect you positions, but in the end it more than outweighs the risk of letting losers drag you down.

Risk Management
Exiting Trades
You're on the list right?
Want to know when new posts go live? Subscribe to get updates each time we publish new training, research, or case studies. Autotrading is moving fast so don't get left behind.
‍
Thank you! Please click the verification link we just sent to your email address.
Oops! Something went wrong while submitting the form.
We’ll never share your email address
Featured posts
How to Automate a Bollinger Band Strategy
How to Automate a Bollinger Band Strategy
March 31, 2022
We Analyzed 20,000 Options Trades: Here’s What We Learned About Position Swings
We Analyzed 20,000 Options Trades: Here’s What We Learned About Position Swings
March 25, 2022
Backtester Enhancements Unlock Research Superpowers for Options Traders
Backtester Enhancements Unlock Research Superpowers for Options Traders
February 22, 2022
Building an RSI Swing Trading Bot with Credit Spreads
Building an RSI Swing Trading Bot with Credit Spreads
December 13, 2021
3 Smart Ways to Use SmartStops
3 Smart Ways to Use SmartStops
December 8, 2021
5-Year SPY Put Credit Spread Backtest
5-Year SPY Put Credit Spread Backtest
November 17, 2021
Managing Multiple Strategy Types with Monitor Automations
Managing Multiple Strategy Types with Monitor Automations
June 30, 2021
Automated Does Not Mean Unattended
Automated Does Not Mean Unattended
May 19, 2021
Using Bots to Automate Profit Targets and Stop Losses
Using Bots to Automate Profit Targets and Stop Losses
April 19, 2021
Most popular
See All
13 Stock Chart Patterns that You Can’t Afford to Forget
13 Stock Chart Patterns that You Can’t Afford to Forget
6 min read
The Three Best Option Strategies for Earnings
The Three Best Option Strategies for Earnings
8 min read
How Can a Call Option Decline in Value When a Stock Rises?
How Can a Call Option Decline in Value When a Stock Rises?
3 min read
What Your Mother Didn’t Tell You About Trading Iron Condors
What Your Mother Didn’t Tell You About Trading Iron Condors
4 min read
4 Must Know Options Expiration Day Traps to Avoid
4 Must Know Options Expiration Day Traps to Avoid
5 min read
Problems Getting Your Option Order Filled? Try These 3 Quick Adjustments
Problems Getting Your Option Order Filled? Try These 3 Quick Adjustments
7 min read
5-Year SPY Put Credit Spread Backtest
5-Year SPY Put Credit Spread Backtest
7 min read
How to Set Up a Broken-Wing Butterfly Option Strategy
How to Set Up a Broken-Wing Butterfly Option Strategy
3 min read
3 Option Strategies to Use During Low Volatility Markets
3 Option Strategies to Use During Low Volatility Markets
2 min read
Naked Option Selling: The Stupid Myth of "Unlimited Losses"
Naked Option Selling: The Stupid Myth of "Unlimited Losses"
6 min read
Rising Interest Rates: Taper Tantrum or Opportunity?
Rising Interest Rates: Taper Tantrum or Opportunity?
5 min read
Mastering the 4 Different Types of Option Orders
Mastering the 4 Different Types of Option Orders
8 min read

No-code, fully automated trading for stocks and options.

HomeAboutLegalStatusContact
©2022 Option Alpha. All Rights Reserved. Patent Pending USSN 63/118,547