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