Comments on: World Series Series, Part 2 – Have a Backup http://www.thestockbandit.net/2008/10/23/have-a-backup/ Trading blog for day trading, swing trading, and trading psychology Wed, 02 May 2012 22:07:00 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: TheStockBandit http://www.thestockbandit.net/2008/10/23/have-a-backup/comment-page-1/#comment-114636 TheStockBandit Mon, 27 Oct 2008 02:02:20 +0000 http://www.thestockbandit.net/2008/10/23/have-a-backup/#comment-114636 Hey Mark! It's always great to see you, thanks for stopping by to post this comment. You bring forth some excellent points, and I can't agree more when it comes to 'being a skilled risk manager.' With the options, as long as one's timeframe is at least several days for a trade, it's not at all a bad idea to protect with them - especially during earnings season like right now. Because like you said, that's how you guarantee that disaster is a defined-risk event. Thanks again for your comments! Jeff Hey Mark!

It’s always great to see you, thanks for stopping by to post this comment. You bring forth some excellent points, and I can’t agree more when it comes to ‘being a skilled risk manager.’

With the options, as long as one’s timeframe is at least several days for a trade, it’s not at all a bad idea to protect with them – especially during earnings season like right now. Because like you said, that’s how you guarantee that disaster is a defined-risk event.

Thanks again for your comments!

Jeff

]]> By: Mark Wolfinger http://www.thestockbandit.net/2008/10/23/have-a-backup/comment-page-1/#comment-113175 Mark Wolfinger Fri, 24 Oct 2008 16:47:34 +0000 http://www.thestockbandit.net/2008/10/23/have-a-backup/#comment-113175 Limiting the downside and limiting losses are essential aspects of trading. I don't see how anyone can be a successful trader without being a skilled risk manager. I agree that it's a psychological problem for many investors - when the stock gaps through their mental stop-loss price and now the loss is even larger than anticipated. One way to play, yet still be protected is to trade options - using strategies that always have at least as many long options as shorts. Paying up for those options is difficult when option prices are so elevated (compared with historical prices - they may be fairly valued in this volatile market), but owning positions with limited risk guarantees that the investor survives a disaster in the marketplace. Limiting the downside and limiting losses are essential aspects of trading. I don’t see how anyone can be a successful trader without being a skilled risk manager.

I agree that it’s a psychological problem for many investors – when the stock gaps through their mental stop-loss price and now the loss is even larger than anticipated.

One way to play, yet still be protected is to trade options – using strategies that always have at least as many long options as shorts. Paying up for those options is difficult when option prices are so elevated (compared with historical prices – they may be fairly valued in this volatile market), but owning positions with limited risk guarantees that the investor survives a disaster in the marketplace.

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