Research In Motion Stopped Out

Research In Motion (RIMM, $38.99, up $1.57) is up 4% today and has made a run back to $40. This morning, I sent out a blog before the market opened to make sure that you set stops on the RIMM positions to protect your profits.

I had mentioned to also close the position on Monday if you got the gains back from Friday. The reason I seem to keep repeating myself is that I want you to understand the importance of placing stops and how the are so important in your everyday trading.

The March 40 puts (RUPOH, $3.50, down $1.20) were profiled at $2.15 last Wednesday and hit a high of $4.15 by Friday and $4.75 on Monday. The return on the trade was over 100%. If you still have the trade open, then you have given back nearly 50% of your profits because of greed. These puts opened at $4.50 this morning and had a stop of $4.30 which protected your 100% return.

The March 35 puts (RUPOG, $1.37, down $0.71) were recommended at 85 cents and traded as high as $1.90 on Friday and $2.15 yesterday. I said to set stops at $1.90 and the puts opened at $1.95. Since then, they have dropped 30%.

The Spider Gold Shares (GLD, $97.80, up $2.03) are another example of a trade that reached our outlined goals and we got out when the returns hit 100%. The trade was based on gold hitting $1,000 and this ETF hitting $100. This trade was closed last Friday when the March 99 calls (GLDCU, $2.15, down $1.28) hit $4.10. The calls were profiled at $2.05 and hit a high of $4.20 on Friday. Now look at them. They are almost right back at our entry level price.

The March 100 calls (GLDCV, $1.90, down $1.20) were recommended at $1.90 and traded to $3.80 which also marked a 100% return. Today, they are down 40% after opening at $2.90.

The General Electric (GE, $8.55, down $0.30) March 7.50 puts (GEWOU, $0.70, up $0.07) traded as high as 73 cents and the exit on them was at 75 cents. Close enough, close the trade.

I just wanted to point these things out because a lot of option traders fail to use stops or hold on to positions for too long after making big gains. By using stops, you take emotions out of the trade and you have measures in place to protect your profits. These are three classic examples of how stops and targets are used and how to manage your trades.

Rick Rouse
Rick@OptionsMentoring.com

]]>

Leave a reply Cancel reply

CFTC Disclosure:

GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THESE METHODS MAY HAVE WORKED IN THE PAST, PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH Momentum Options Trading, LLC CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCE. THERE IS SUBSTANTIAL RISK IN TRADING. A LOSS INCURRED IN CONNECTION WITH FUTURES TRADING CAN BE SIGNIFICANT. WE MAKE NO CLAIM REGARDING PAST OR FUTURE PERFORMANCE. WE MERELY TRACK EVERY TRADE AND SHOW THE PERFORMANCE OF ALL TRADES THE SYSTEM OR NEWSLETTER PRODUCES. SIMULATED TRADING IS DIFFERENT THAN TRADING REAL MONEY. HYPOTHETICAL RESULTS ARE NOT REAL RESULTS. PLEASE CONTACT YOUR BROKER ABOUT THE RISK OR TRADING STOCKS, OPTIONS OR FUTURES. ALL COMMUNICATIONS ARE OPINIONS NOT ADVICE.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED 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 THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

Blog