In options trading, investors may experience losses. In this case, some investors may consider carrying orders, that is, continuing to hold losing positions in the hope that prices will rebound, thereby reducing losses or achieving profits. However, whether it is suitable to carry orders needs to be comprehensively considered based on multiple factors. The following article introduces whether it is suitable to carry orders after losing money in options trading? This article comes from: Option Sauce
Options are different from stocks. Options have an expiration date, and the closer the out-of-value contract is to the expiration date, the easier it is to return to zero, so it is not recommended to hold the order.
At the same time, if the market conditions change or personal judgment is wrong, you will face a 100% loss. Therefore, it is recommended that in options trading, after establishing a position, when the exchange rate has developed in a direction favorable to you, you should close the position in time.
Take the 50ETF market trend from September 16th to October 11th as an example:
On September 16, the closing price of the underlying 50ETF was 3.034, and it reached the closing price of 3.032 on October 11. In the intervening 14 trading days, it experienced a period of continuous decline and rebound. In the end, there was no significant decline in the underlying price.
Based on this, we selected in-the-money, at-the-money, and out-of-the-money call options to observe their respective price changes. What problem does it explain?
Subscription of the real value October 2850 contract: the closing price on September 16 was 2,000 yuan, and the closing price as of October 11 was 1,816 yuan. Decline of 9.2%. Subscription of the flat October 3000 contract: the closing price on September 16 was 899 yuan, and the closing price as of October 11 was 486 yuan. A decrease of 45.9%
Subscription of the out-of-value October 3200 contract: the closing price on September 16 was 218 yuan, and the closing price as of October 11 was 29 yuan. A drop of 86.7%.
Loss situation after option trading: out-of-value loss greater than on-the-money loss greater than real-value loss
Therefore, why is it not recommended to hold positions in out-of-the-money contracts in volatile market conditions? This is because option contracts have a loss of time value. When the contract price drops, if you want it to rise back up, the underlying 50ETF needs to have greater favorable fluctuations.
If you want to hold a position, it is strongly recommended to do real-valued contracts with a small proportion of time value.
At-the-money and out-of-the-money contracts can be traded intraday. However, in volatile market conditions, it is not recommended to hold positions! ~~
After market data inspection and comparison:
First: if the position is held for more than three days, the probability of loss exceeds 20%
Second: if the position is held for more than five days, the probability of getting back the capital does not exceed 30%.
Third: For orders held for 1 to 2 days, the probability of profit is more than 60%.
If there is a unilateral rise or fall in the market, and there is a unilateral trend in the market, you can consider holding a position at a flat value and shallow out-of-value contracts, so that you can make greater profits.
To sum up a few points, I hope it will be helpful to everyone. Is it suitable to carry the order after losing money in options trading?
1. From the perspective of option characteristics, option buyers are more suitable for intraday or short-term trading, and are not suitable for long-term orders.
2. Consider the value of time and do not ignore its existence.
3. If you choose to hold a position, it is more stable to use real value (time value accounts for less). The chances of follow-up are greater
4. Don’t bet on out-of-the-money contracts easily, as the risk of returning to zero is the greatest.
5. Stop-profit and stop-loss should be done well. Don’t be reluctant to leave after making a profit and then return the profit.
6. Do the market that you are familiar with, rather miss it than make a mistake!
To sum up, whether it is suitable to carry an option after a loss in option trading requires comprehensive consideration based on multiple factors. Investors need to understand their investment objectives, risk tolerance and investment strategy, taking into account factors such as market conditions, the remaining expiration date of the option contract, volatility and exercise price, as well as their own financial situation.
In any case, investors should remain calm, analyze and make decisions rationally, and avoid blindly following the trend or being blindly confident.