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Hi Rtrs,
I have the same question. I do not use stops except very selectively mostly
in lumber, S&P and Coffee because a stop is another parameter which can
degrade the system. I have considered options as a hedge but again worry
that option premium will eat up my profit. My mental stop is $ 500. The
option may be worthwhile if costing less than $500. However I have not yet
come up with a solution. A broker at Spike Trading uses Options as an hedge.
He uses Time and Price to forecast turning points, tries to get in at a
point where his risk is minimun if trade fails. In case of losing trade, his
option kicks in to cover his losing trades and he exits his future trade, so
when he loses, he doesn't lose much. I don't know how good this strategy is.
It works better in futures which tend to reverse sharply and suddenly. Any
comments on the above or anybody doing something similar.
Happy Trading Ashif
At 04:32 PM 1/29/98 +0000, you wrote:
>I would really like to here how you can apply a protective stop thru
>options. I had never really considered this.. Just assumed the
>premiums would eat any profits. How do you justify the cost???
>
>Richard wrote:
>>
>> I long ago stopped putting stop orders in. Now I protect myself from
>> disaster losses using various options strategies. Not as easy, but no
>> getting stopped out at inopportune times.
>>
>> > Us traders that are not in the pit cannot compete with pit
traders on
>> >their level because the lag with even real time data is enough that you
>> >would lose most every time. This does not mean that you can't win but you
>> >have to learn to exploit your advantages as they do. So I submit that you
>> >need to ask if I were in there shoes what would I do.
>> >
>> >Best Regards,
>> >Brent
>
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