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Option1 assuming that the loss is beyond my standard limits. Two reasons: 1)
conservation of capital and 2) clear mind to trade most profitable opportunities
currently available. Losing trades are like an albatross.
Earl
-----Original Message-----
From: Gwenn Ael Gautier <Gw.Gautier@xxxxxxxxxx>
To: RealTraders List <realtraders@xxxxxxxxxxxxxx>
Date: Wednesday, June 10, 1998 9:38 AM
Subject: Question A
>Hi all!
>
>I was curious to find out about what traders usually do in the following
>
>case. I hope as many as possible among you will respond, and I'll post
>the results over the week end:
>
>To respond, please hit "respond to message" and answer "option1" or
>"option2" in the text body. That's all you need to do. Thank you in
>advance for your participation
>
>Question is:
>You regularly trade options, by shorting puts in stocks you have defined
>
>as being trending up. You trade ten stocks for every quarterly expiry,
>and your average trade is about $1200 in profits. You are currently in a
>
>short put options trade in a stock you believe in, however, due to an
>unexpected crisis at a competitor, your position has been hurt, you are
>losing $3500 at the moment.
>You are facing the following alternative, which one do you chose?
>
>Option1: Take immediate loss of $3500, and wait for expiry to move on to
>
>next stock.
>
>Option2: Manage the position, by rolling it to the next expiry (and
>forego the possibility to trade another stock that meets criteria),
>knowing you have 40% chances to end up losing only $1900 in three months
>
>(ie recoup $1600), and that if it doesn't work out still, you'll be down
>
>$4500, (at which point you might still roll your position to the next
>expiry)
>
>Pick your choice...
>
>Gwenn
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