From Theory To Practice - April 22, 2021 - Know What You’ve Signed Up For

published 3 weeks ago by tastytrade, Inc.

As we look over our NFLX and CMG earnings trades from the last couple of days, we take a few minutes to remember “what we’ve signed up for”. In order to correctly assess the appropriateness of a potential adjustment, it’s critically important to understand what your ultimate goal is with the position overall. Obviously, we want all of our trades to be profitable, but there are certain times when the specific circumstances of a position are nuanced. For instance, an earnings trade could be an overnight trade, or it could be a regular cycle trade. You could manage your winners at some percentage of profit after so many days, or you could stick to a more static rule, like 50% of max profit. Understanding what you’re going to do at the outset can really help you make informed decisions over the life of the trade.

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