trading spreads vs. directionals with stop

photo guy

Newbie
1 0
Greetings,
In a quest to trade for income, credit spreads have a history of reasonable success, but while paper trading have found selling single puts or calls with stops to be successful. Should the unfortunate event occur of the price shooting through your short strike requiring your exercise of the long (and resulting $ loss), why not place a stop loss on the short position for the equivalent value, take your loss and move on to the next trade? Trying to understand and develop a consistent strategy. Thanks in advance for your assistance.
 

ACstudio

Active member
138 14
Greetings,
In a quest to trade for income, credit spreads have a history of reasonable success, but while paper trading have found selling single puts or calls with stops to be successful. Should the unfortunate event occur of the price shooting through your short strike requiring your exercise of the long (and resulting $ loss), why not place a stop loss on the short position for the equivalent value, take your loss and move on to the next trade? Trying to understand and develop a consistent strategy. Thanks in advance for your assistance.



why not place a stop loss on the short position for the equivalent value,

For me.....I will not use stops as there is a high probability that the stop will be tested at some point before the trade is profitable enough to take off. I prefer to either manage the risk at entry....by selling a vertical spread or if it is a naked short there are several choices that do not involve a stop loss. I might be able to manage the deltas by selling opposing positions if there is enough premium and or look to roll for more duration for either a credit or roll for better position for less credit or even....but never for a debit. You would be surprised how often a losing position can become a winner or scratch if given a little more time.
 
 
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