Stocks & Commodities V. 27:9 (29): Explore Your Options by Tom Gentile

Stocks & Commodities V. 27:9 (29): Explore Your Options by Tom Gentile
Item# \V27\C09\170EYO.PDF
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Explore Your Options by Tom Gentile


I bought five Xyz October 160Ė170 call spreads for $1.79. Hereís my trading plan: Buy Xyz October 160Ė170 calls spread for $1.79 Max loss: $1.79 Max risk: $1.79 Max reward: $8.29 Ratio: 4.6 to 1 Stop-loss: If Xyz stock closes below $131 Profit stop: Exit three contracts @ tech stop $155 ($3.46 net credit exit) and let the other two contracts run. Time stop: 30 days to expiration Xyz as of todayís close: $152 Current value of spread: $3.00

What else should I build into my trading plans? This is when it gets difficult for me: When Iím winning I want to do too much (make a trade adjustment, watch the market live) because Iím excited. When Iím losing, I donít even want to open my trading account and look at the balance.

First, let me say youíre doing the right thing by developing a detailed trading plan for your trade and at the same time examining the what-if scenarios. Next, letís break your questions down into two parts: 1) the actual trade and 2) the psychology of trading options and spreads.

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