Market Measures

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The Tradeoff of Stopping Losses

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Stop losses are a popular strategy used by traders to achieve better performance by closing out of a losing trade. But do they work?

tastytrade ran a study where we compared managing 16 delta strangles in SPY, 45 DTE at expiration and 1x-5x credit received losses.

We found that on average, stop losses hurt performance over the long run, because most of the trades you stopped out of eventually had a better P/L at expiration.

Tune in as Tom and Tony expand on this concept.

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