Plan Your Option Trade and Trade Your Option Plan

Many of you may have already heard that saying when it comes to trading.  I just threw in the word option as that is what I primarily am – an options trader.

There are times where something comes up when watching the financial news networks that may say something about a trade you are already in that makes you doubt whether you should stay in the trade or bail on it.

For the most part my experience and history with trading options says to stick with your option trading game plan as your intuition and reason for the trade to start with usually works out.

Don’t Get Shaken Out of an Option Trade Prematurely

If you find yourself watching too much news, online or on tv or elsewhere the risk is seeing a headline announcement or story that makes you question the trade and in some cases traders stop out of the trade only to see their original idea paly out successfully.

My education to you all in that situation is to consider stopping watching the news and reading headlines as it may be causing you to get more emotional about your trade than you need to be.

Example on ServiceNow, Inc. (NYSE: NOW)

Back on January 5, 2023 we highlighted an option trade on NOW to subscribers to an alert service whose content we are responsible for.

The next day the stock was down over 10 points.  There was an online article online about a research company’s view that the stock was too risky to buy  right now.

One of my instructors and I had a discussion on whether or not to cut the option trade loose.  He asked if we just cut it loose early and at a smaller loss than what it could become because of that article’s view.

I am not going  to show you the option position we highlighted, because the price of the option then, after the price drop and what it is at the time of the writing of this educational piece is now; the pricing isn’t the important part.  The lesson is.

And the lesson is this.

Plan Your Option Trade and Trade Your Option Plan.

The option trade ideas we highlight come with a trade management plan of stopping out at a 50% loss.

As long as the option value isn’t losing 50% we maintain the trade and anticipate it working.

In our discussion I was asked if we should stop out based on that article my direction was to maintain the trade and not get shaken out because one person writes an article.  I have found in my trading that isn’t the best thing to do.  I said we stay the course and only worry about it if it hits our stop.

We stayed the course and since it did not hit its 50% stop the trade is still being tracked.

As of now it shows it is up 70%.  Here is a chart view of NOW from the start date of the trade to present.

Staying the Course on an Option Trade

It is very tough to hear or read things that cause you to question being in a trade or not.

The thing to ask yourself is do you / did you have a plan before you placed the option trade?  If you did then it is up to you to stick to that plan.  Having NO plan makes you at even greater risk of getting shaken out on the news.

Having an Options trading plan helps you maintain your option trades.

We are coming up on Martin Luther King, Jr. Day and the markets will be closed that day, so we want you all to first and foremost enjoy your three day weekend as the country honors Dr. King.

App: Toms Option Tools

Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.

Disclaimers

Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.

Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.

This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.

You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.

Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.

Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.

A full disclaimer can be found here:  http://www.tomgentile.com/legal_disclaimers.html.