Lesson Overview

Using Stop Losses

I hate "stop-loss" orders - and you will too. Once and for all we'll completely put to rest our case as to why using stop-losses actually creates more losing trades with risk defined strategies. And it's not something that you can argue because it's based purely on the math and probabilities.

But when it comes to trading undefined or naked option strategies there is one type of stop-loss order that "might" possibly help reduce your risk slightly over long periods of time.

Even if you don't use this one particular stop-loss order you'll still be fine and have a very low likelihood of blowing up your account and losing all your money as long as you keep your position sizes small.

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  • You are correct – taking winners earlier dramatically increases your overall win rate.

  • NC

    Hi Kirk,
    how do you decide whether you are adjusting a position e.g at delta=30 or let it run and hope that it comes back again because of POT?
    Cheers, NC

    • There’s no hard and fast rule – for me it really comes down to asking if the overall portfolio needs the adjustment too. So if the adjustment is to get more bullish, do I really need another bullish adjustment in the overall portfolio.

  • Yep.

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