Now that we’ve split Cabot Options Trader into two advisories, I’ll be able to implement some new hedging strategies in Cabot Options Trader Pro to manage both winning and losing trades.
For instance, we’re holding a solid profit in our Applied Materials (AMAT) calls. Instead of just taking off the position, we can sell other calls against the calls we currently hold to further enhance and protect our current profits.
Similarly, our new strategies will help us in losing positions such as Corning (GLW). Instead of just taking off the position, we can sell other puts against the puts we currently hold to lessen our loss potential while still giving us profit potential.
When we execute these trades, I want to be clear that you need to keep your “units” exactly the same. By “units” I mean if you own 10 AMAT calls, you can only sell 10 AMAT calls against them. If you own 25 GLW puts, you can only sell 25 GLW puts against them.
If you keep your “units” exactly the same, you’ll continue to have your risk defined.
In these types of trade alerts, my first couple of words will read “Adjust Existing Position” and then I will go into the trade alert.