How I Use Trailing Stops

Sean McLaughlin
March 21, 2024

The majority of my current open positions are long-biased. If the market continues to rise, I expect many of these positions to keep working for me.

My few short-delta positions are on the verge of stopping me out for a loss. They were put on as portfolio hedges against all my long exposure. So in a way, I’m happy they haven’t worked out.

That’s the thing about hedges. I don’t really want them to work. Because that means the positions I really want to work likely just got whacked.

Ok, so my hedges aren’t making me money and my long positions are. What else can I do to lock in gains and minimize the potential for giving back a lot of open profits?

I can be more aggressive with my trailing stop levels.

For options trades, I don’t use stop-loss orders to exit my trades. That is not a good practice with options. Bad fills are usually the result. Instead, I set price alerts in my trading platform that alert me when levels are hit. At that point, I’ll begin to work a limit order to exit my position.

This week, I raised stops in 12 bullish positions. Using discretion, new stop levels will usually correspond with a new, higher level of support and/or a 50-day moving average. The 50-dma is often a handy guide that I want my trending positions to be staying above (vice versa if short).

Here is the weekly live Options Jam Session that I do for All Star Options subscribers where I review any exits or adjustments to trades I’m in, as well as all updated stops. If you’re new here, this might be a good introduction to how we do things:

Trade 'em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research

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