Your 2020 Option Trading Mantras

Today I am going to share some more of my favorite sayings when it comes to option trading. In fact, many of my Group Coaching students hear my voice when they repeat them in their head. To me, that is a good thing, although I’m sure my voice can be annoying at times. All kidding aside, remembering to say some of these, and to follow them, can make you a more disciplined trader.

If You Get a Big Move in Your Direction…

If you get a big move in your direction, you need to do something. What I mean here is fairly obvious. If you get a big directional move that favors your trade, you need to do one of two things or both. The first is take some profit if applicable and don’t be too greedy. The second is to move up your hard or mental stops to either lock in some gains or remove risk by bringing the stop up to breakeven. Generally, when I get a bigger than expected move, I do both: take some profit and move my stop loss.

Throw a Profit-Taking Target Out There

This is something I practice on virtually every option trade I take with the exception being a longer-term time spread. When I initiate a new trade or have an exiting position, I enter a profit taking order with either a buy or sell limit. This instructs my broker to exit the position if my designated profit is realized. We have this discussion often in class. I tell traders that even if you are watching your positions, it makes sense to have a limit order standing. Sometimes the order will fill when you don’t even realize it.

If You are Down More Than You Expected to Be…

This is a saying that may not make sense at first. The more you trade, however, the more it probably will. I derived this saying from being in this situation too many times as a new options trader. Essentially, I am saying that when your position is down more than you had accounted for and you are fortunate enough to get back to breakeven or close, exit the position. Pretty much it is saying that you were fortunate and lucky to get back to being flat, so don’t push your luck anymore and just be happy. This has served me well in the past and currently.

These are just a few of the sayings I like to use myself and in my teaching. Feel free to use them and claim them as your own. I just want to help. Have a Happy New Year and make 2020 your best trading and investing year ever!

John Kmiecik, Market Taker Mentoring

Trader Education