Posted 2 years ago
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So just thinking about this more.... If I'm trading options and need to base my stop loss on the ask price of the option vs the strike price of the stock, I think I would need to adjust my stop loss to reflect a $1.00 change to trigger an exit if I entered and the market goes the wrong way.
So if I have a $10,000 account and will only risk $100 (1%) per trade, if the option entry is $3.00 long call x 100 shares in an option contract, my entry total would be $300. If the stock price drops, the option value will drop too so if I set the stop loss trigger at $2.00, I would only lose the 1%. Of course this is only based on 1 contract option so if I entered buying more than 1 I would need to adjust accordingly.
I'm thinking this is the way I will need to approach it if I can't set a stop loss based on the actual stock price. I don't see how I would be able to use ATR when going the options route.
My entry points would still be based on the MT4 technical indicators.
What do you guys think?