More and more I am getting quite happy with my newfound strategy. I had my old March 230 call that I bought at a good time, it ran up in price the last time we were in the 220s (should have sold it off then and didn't) and then became almost worthless, and then thanks to the recent run-up has been slowly gaining its value back till today it turned solidly profitable again for me. Had I had my strategy in place the last time around I would have sold it off then, freed up the capital and been able to turn it around to work for me again elsewhere. Instead it sat, slowly becoming worthless and even after starting work on my "non-emotional" state of mind, I had already written that off as a total loss so wasn't going to care too much what happened to it.
I had bought the thing back in December for 9.65 saw it go decently positive, crash down to under like 2$ at one point, and then slowly but surely pull back out of its depths to when it sold today at 10.47. What I had done once it recovered into the 6$ range was placing trailing stops about 1$ below the then current price, and then every other day as it moved higher I would adjust up the stop loss. My target to sell was 12.55$ I figured if it could hit that I would just make a run for it regardless. We hit 11 something at some point today, but then the price came down, and from the chart you see it came down quite a bit. But my stop trigger having been moved up to 10.50 gave me a sell price of 10.47 so although I never fully realized what I was "hoping" to hit. I did finally turn a profit on it which made me happy enough.
If I was running on the old system, I would have likely let myself think too much about it, be back holding the bag again as that particular call is now worth only 9.47 which would be back in the negative for me, and who knows what tomorrow may actually bring. So forcing myself to take the profit (and 8% return is not great at all, mind you...) as opposed to eating yet another loss is a win in my book.
Sure I have had the big wins as well over the past couple days. It isn't the big wins I have issue controlling myself over... those are no-brainers. I am posting these in the hopes that it helps others out on the less pleasant side of working with options of how to handle (or at least how I am learning to handle) limiting losses and even hopefully booking some amount of profit on every trade. It was hard for me at first to accept anything less than 50% and always shooting for 100% or more... and you are just not going to see those types of returns on every trade. At least I don't... if someone has that magic formula please let me know! And because of that, in my anger of not seeing 50% I was letting options expire to worthlessness instead of cutting my losses (or even booking a small profit)...
So thank you broker for having the OCO order type, because you are my new best friend in the world! Even if you don't want to use the order type for control like I am, I highly recommend you set actual limits on where you are willing to let the price move to and stick to it. I like putting in the exit strategy from the start since I get rather busy at my actual day-job and can't watch the market the whole time. But if you can watch it constantly AND you can force yourself to execute on the sale when a trigger is hit, then I think that is the important takeaway for options. You just don't have the luxury to wait around forever like you can with shares, and, waiting generally hurts more when things start going south... it *rarely* helps. So what I would recommend out of all this is set both a bottom and a top. ALWAYS leave your top fixed. That was your "best case" when you placed the order. Anything outside of that is not accounted for in your plan and you need a new plan (meaning you should execute on a new strategy entirely, whether that is selling some of your position, or starting a new set of calls/puts whatever). Then as the price moves up toward your best case, slowly move up your bottom until either the top is hit or you trigger that bottom value.
buy some puts at about 180-200 strikes. If the stock jumps $15 up your puts are worthless but you committed a small amount and made lots of 'paper profit' on your stock/calls. If the price drops $15, it mitigates some of your paper loss as the puts now have made you a couple bucks.
