In a perfect world, all of our trades would be winners. Unfortunately, we have to remember that trading the tastytrade way involves probabilities. Even the highest probability trades will be losers once in awhile. For that reason, it’s important to have rolling and closing mechanics in place. Let’s start with the importance of account size first.
Larger accounts have a lot of luxuries that smaller accounts do not. For example, if a trade goes against us in a large account, we could hold the losing trade and roll it into perpetuity and hope that eventually the trade goes our way and we can get out for a net profit. It’s harder to do this in a smaller account, as losing trades can eat up a larger amount of the portfolio. It’s much easier to keep our individual trade risk small relative to our portfolio in a large account compared to a small account. If we have a losing trade in a small or large account, we have a decision to make. We have to decide whether we want to roll the position forward in time and keep the dream alive, or close the position at a loss to protect the value of the account. When making this decision, we have a few things we consider:
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