5 Keys To Safeguard Capital From Losses In Spy Put Trade

Trading market direction is not the easiest of trades to accomplish. It is not a matter of buying at the top of a market and selling when the market bottoms or vice versa.

The chance of an investor “nailing” the top and bottom of market moves is very small.

Instead trading market direction is more about pinpointing the moves within larger moves. This helps defray the periods when an investor buys into a position as the market moves, watching unrealized profits grow as the move unfolds in their favor and then watches those profits evaporate when the move changes against them.

In most instances investors fail to get out of a losing position early. They hold on hoping the trade will return to profitability. I have done exactly this mistake a number of times over the 4 plus decades I have been investing so I understand when investors write me with positions they have held too long and are sitting with losses wondering what they can do to repair the trade.

Once such investor recently wrote me who bought spy put options for Nov 13 expiry only to have the market stage a huge rally. The question is adjusted to make it more understandable. The investor basically paid $6.00 for the Nov 15 $186 Spy Put and they are now trading for $0.10 cents today (Oct 26). Let’s review his question and some answers.

Investor Questions:

“Hi Teddi, it is great following your coverage and it helps me lot. In view the bearish market I re-entered a SPY put Nov 13 186 for $6 on Sep 30. However, based on the current bounce happening globally from Asia and now in Europe and also the strong SPY futures for next opening, what shall I do with those puts, 300 of them? Hold or sell? “

Some Answers:

This strategy discussion article is 1600 words in length and is designed for FullyInformed Members interested understanding 5 keys methods to safeguard capital from losses when trading options such as the Spy ETF or the SPX ETF.

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.