Pay For Your
Stops by Joe Luisi
Want to get into positions with good risk-return ratios and
firm boundaries of gain and loss? Look no further: Hereís a
technique for having it all ó or most of it, anyway.
You know you should use stops,
but they cause losses, donít
they? Would you use stops if
you could minimize or even
erase those losses by selling
options? Would stops look better to you then?
Sooner or later, every trader
comes to realize that he needs
to use stops. It doesnít matter if
youíre a short-term trader or a longer-term trader; stops are
essential for the preservation of capital. In addition, using a
stop makes you be very specific about the point at which
youíll admit you were wrong about a trade. But is there a way
that you can somehow reduce the costs of stops? Better yet,
is there a way to make money even if you get stopped out?
Enter, if you will, the wonderful world of options. Options have become so popular
that almost every futures market offers them,and more than
2,000 stocks do as well. Iím
going to assume that you have
a basic working knowledge of
options, and Iíll show you how
to use them to help cover the
costs of your stops.