The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be going through a simple trailing stop loss example. Trailing stop losses work well for regular long equity, whether it’s stocks or ETFs or futures contracts. They don’t really work so well for options trading because generally, stop losses actually create more losing trades when you’re trading options. In this case, a trailing stop loss order might look something like this. Say a stock is trading at $100 and you have a $1 trailing stop loss order. What that basically means is that you give yourself a $1 cushion that the stock can go down in price before your stop loss is executed and this $1 margin stays in place until the stock starts to go up. And so, if the stock goes up, then that margin readjust higher, so that you continuously keep a $1 spread between you and the market. Again, if a stock is trading at $100, you might have a $1 stop loss order which means that if the stock starts to go dow