Suppose I have a short SPX put and put in an order for a stop loss buy to close on it. It doesn't really matter but let's say it's at 5x the current price so it hopefully doesn't "accidentally" trigger.
My question is, how well does that work in practice to protect downside risk if the SPX drops?
I've read the FAQ and realize with illiquid options it's a problem.
If the market is in freefall and halts are triggered and so forth, will I get an execution reasonably close to the trigger price? Or is there a significant risk that the drop is so fast the execution price will be far above the trigger price? Is there a way to quantify the risk?
How well do stop loss buys to close short puts for SPX work in practice?
byu/LakeTwo inoptions
Posted by LakeTwo
4 Comments
Rookie move.
Rookie move.
Depends on the DTE. Volatile price swings on expirations closer to expiring will have a larger impact on price than something further out.
so basically rather than spend the time and effort you would rather have someone try it and do all the hard work for you!
incredible !
LOL