Pro tip: Never use stop-losses on options.
Just don’t do it.
It’s not a pet peeve of mine, just bad practice.
A stop-loss is an order you can place with your broker ahead of time, letting them know the price you wish to sell at if it falls to that level. Once it falls to that price, you’re ready to exit the trade so that you can preserve capital in case it’s set to fall even further.
When you’re trading highly liquid stocks, stop-losses can work. They’re a great way to help you sleep at night and understand your risk level.
And it’s the smart thing to do when it comes to investing: Manage your risk.
But when it comes to options, there are many reasons why you would never want to use a stop-loss.
Today, I’ll walk you through why I avoid them like the plague in options trading.
And I can show you using our open recommendation in Qualcomm (Nasdaq: QCOM).
We Didn’t Want to Exit Qualcomm
At the beginning of November, I sent out the recommendation to add call options on Qualcomm, just to give you a taste of how options trade in real time.
We were following my Quick Hit Profits strategy of buying call options on a company after they reported earnings and hit my Profit Trigger.
But on the third day of our position, just two days after I recommended the call options, the stock experienced a gap lower.
A gap is the change from the close price to the next morning’s open price.
The stock closed at $142.61 on November 9, and opened the next morning at $140.15 — a mere 1.7% gap lower in the stock.
Here’s the problem: Options can see a much larger move than that.
Even though the stock opened just 1.7% lower, the option was down 18%. Our position had fallen roughly 40% in just three days.
Remember, a stop-loss is an order saying that you want to exit your position if it falls to that price or lower. “Or lower” is the key here.
Because the market makers see that someone wants to sell at that stop price. And they have the ability to push option prices to those levels when it is reasonable, like the quick drop we saw in our Qualcomm call options.
While you may think you have a tight 20% stop-loss on the option and are only risking 20%, if the option price gaps lower — even by a mere 18% — your orders could be filled for a 40% loss … or even worse.
That dramatic difference basically makes using stop-losses on options pointless.
That move would have easily hit almost everyone’s stop-loss if you had one, unless it was an extremely low stop-loss — like 75% or more.
But the most important part is what happened over the next few days. The option price swung back higher to a profit of nearly 40% at its peak.
A wild turn of events that you would have missed out on if you used stop-losses.
Follow a Profitable Strategy
That’s the main reason I avoid using stop-losses on options.
Instead, I prefer to follow a proven approach that’s designed to generate profits, even accounting for the occasional loss. Then you’ll have a better idea on when to exit, and not base it on some random rule.
Let me give you an example from my Quick Hit Profits service…
A trade I recommended on Qualcomm last year was down more than 40% at one point. It swung back over the next few weeks to deliver us peak gains of 133% in 51 days. Had we preserved capital when things were heading south, we would have never been handed that triple-digit opportunity.
Here’s the thing with options … The most you can lose is 100%. That’s a total loss of what you spent on the option.
It sounds harsh to lose that much, and it is painful to take a loss of that amount.
But it’s why you should never risk more than you can stand to lose.
Because even though your losses are limited to the capital you spent on the trade, your gains can run much, much higher. You can see gains of more than 100%, 200% and even 500% in a few short months.
If you hit more wins than losses and see bigger wins than losses, you are going to make money over time. That’s the key.
And it’s the No. 1 goal behind every strategy I develop.
Quick Hit Profits is no exception.
If you don’t have a profitable options strategy to follow yet, give Quick Hit Profits a shot. We’ve created a one-of-a-kind opportunity to get started with my No. 1 research service just for Weekly Options Corner readers.
Click here to get all the details.
Meanwhile, I’ll be keeping my eye on the QCOM trade. I will make sure to send an email when I think it’s time to get out.
We’ll be back next week with more options education for you.
Regards,
Chad Shoop, CMT
Editor, Quick Hit Profits
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.. Claretta Franzen Karlik
Athea areasiyealvathi dialog valthea vayehillai super Pierette Noland Donica
Pretty! This has been an extremely wonderful article. Thanks for providing this info. Atlanta Jerry Arathorn
I have only just seen this as stopped blogging. I am glad you like my tips and hope that you will keep following my blogs. Take care. Shelagh x Maible Andie Gruber
Hiya, I am really glad I have found this information. Nowadays bloggers publish only about gossip and internet stuff and this is actually irritating. A good blog with exciting content, this is what I need. Thanks for making this web-site, and I will be visiting again. Do you do newsletters by email? Celina Igor Steinway
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
In the video below you are going to see how I use xxx to find places on high quality targeted blogs to leave comments and to build some really fantastic high authority backlinks and although in the video below, I only find a couple of places, but if you spend a little longer, then you find some great places to leave your link. It really does go to show that I am doing this live and not staged because of I was I would have pre-found the links.
Thank you ACCEPT my blogpost comment Admin.
Thank you ACCEPT my blogpost comment Admin.
Thank you ACCEPT my blogpost comment Admin.
I like this website very much, Its a rattling nice office to read and find info .
Thanx for the effort, keep up the good work Great work, I am going to start a small Blog Engine course work using your site I hope you enjoy blogging with the popular BlogEngine.net.Thethoughts you express are really awesome. Hope you will right some more posts.
reliable cheap viagra buy viagra on oine ViagraCND100Mg – viagra gold bestellen
Good post. I am dealing with some of these issues as well..
buy prednisone online usa prednisone online – where to buy prednisone uk
Whoa! This blog looks exactly like my old one! It’s on a completely
different subject but it has pretty much the same layout and design. Great choice of colors!
Hey there! This is kind of off topic but I need some help from an established blog.
Is it very hard to set up your own blog? I’m not very techincal but
I can figure things out pretty quick. I’m thinking about setting up my own but
I’m not sure where to begin. Do you have any tips or suggestions?
Cheers
zithromax 500 mg lowest price pharmacy online zithromax – zithromax purchase online
Quality articles is the main to attract the viewers to
go to see the site, that’s what this web page is providing.
Hi! I just would like to offer you a big thumbs up for your great information you have got here on this post.
I will be coming back to your web site for more
soon.
propecia without prescription propecia – propecia drug
I’m not sure why but this weblog is loading incredibly slow for me.
Is anyone else having this problem or is it a problem on my end?
I’ll check back later on and see if the problem still exists.
I know this website presents quality dependent articles or reviews and extra stuff, is
there any other site which gives such things in quality?
prednisone 40mg prednisone generic – prednisone 2.5 mg daily
Thank you for the good writeup. It in fact was a amusement account it.
Look advanced to far added agreeable from you! However, how could we communicate?
Howdy I am so grateful I found your web site, I really found you by mistake, while I was searching on Bing for something else, Nonetheless I am here now and would just like to say thanks for a fantastic post
and a all round thrilling blog (I also love the theme/design), I don’t have time
to read it all at the moment but I have saved it and also included your RSS feeds,
so when I have time I will be back to read a great deal more, Please do keep up the superb b.
I have been surfing on-line more than three hours nowadays,
but I by no means found any fascinating article like yours.
It’s beautiful worth sufficient for me. In my opinion, if all site owners and
bloggers made good content as you probably did,
the web will probably be much more useful than ever before.
quest bars http://tinyurl.com/49u8p8w7 quest bars
Heya i’m for the first time here. I found this board and I find It truly useful & it helped
me out much. I hope to give something back and aid others like
you helped me. cheap flights http://1704milesapart.tumblr.com/ cheap flights
Wow that was strange. I just wrote an incredibly long comment but after I
clicked submit my comment didn’t show up. Grrrr…
well I’m not writing all that over again. Anyways,
just wanted to say wonderful blog! scoliosis surgery https://0401mm.tumblr.com/ scoliosis surgery
If you are going for finest contents like me, simply visit this web page every day for the
reason that it offers feature contents, thanks asmr https://app.gumroad.com/asmr2021/p/best-asmr-online asmr
wonderful post, very informative. I’m wondering why the opposite
experts of this sector don’t understand this. You must proceed your writing.
I’m confident, you have a great readers’ base already!
scoliosis surgery https://coub.com/stories/962966-scoliosis-surgery scoliosis surgery
Why visitors still use to read news papers when in this technological
world the whole thing is accessible on web?
ps4 https://bitly.com/3nkdKIi ps4
It’s really a nice and useful piece of info.
I am happy that you simply shared this useful info with
us. Please stay us up to date like this. Thank you for sharing.
quest bars https://www.iherb.com/search?kw=quest%20bars quest bars
431987 461025This web website is often a walk-through for all of the understanding you wanted concerning this and didnt know who ought to. Glimpse here, and youll totally discover it. 507746
792419 437760stays on subject and states valid points. Thank you. 238857
Howdy! This is kind of off topic but I need some advice from an established blog. Is it very hard to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about making my own but I’m not sure where to start. Do you have any points or suggestions? Cheers
851361 132990I like this blog really much so a lot good info . 601326
I have been exploring for a little for any high quality articles or weblog posts on this sort of area . Exploring in Yahoo I ultimately stumbled upon this website. Studying this information So i am satisfied to express that I’ve an incredibly just right uncanny feeling I came upon just what I needed. I such a lot without a doubt will make sure to do not fail to remember this web site and give it a look regularly.
Magnificent goods from you, man. I have understand your stuff previous to and
you’re just extremely excellent. I actually like what you’ve acquired here, certainly like what you are saying and the way in which you say
it. You make it entertaining and you still care for to keep it wise.
I cant wait to read far more from you. This is actually a tremendous
web site.
Hello there! This is kind of off topic but I need some help from
an established blog. Is it hard to set up your
own blog? I’m not very techincal but I can figure things out pretty quick.
I’m thinking about creating my own but I’m not sure where to start.
Do you have any ideas or suggestions? Appreciate it
Since, the loan is available for short period of your time; hence, the repayment period varies from 14-30 days.
In this context, it’s important to say that the lent amount mainly decide the
repayment period.
Feel free to surf to my web blog … Installment Loan USA
Love the site– very individual pleasant and
lots to see! http://multiessay.com
791075 188347Some genuinely wondrous function on behalf with the owner of this site, perfectly great subject material . 509376
Wow because this is excellent job! Congrats and keep it up. https://winsexgames.com/
Keep up the helpful work and generating the group! https://sexygamess.com/
Thanks very handy. Will certainly share site with my
pals. https://ketogendiet.net/
Maintain the excellent job !! Lovin’ it! https://sex4games.com/
Many thanks! It is definitely an amazing web site! https://sexgamesx.net/
Great website! It looks really professional! Maintain the excellent job! https://ketogenicdiets.net/
Great website! It looks extremely expert! Keep up the good work! https://ketogenicdietinfo.com/
The other day, while I was at work, my sister stole my iphone and tested to see if
it can survive a forty foot drop, just so she can be a youtube sensation. My apple
ipad is now destroyed and she has 83 views. I know this is completely off topic but I had
to share it with someone!