Using P&L to Align Trade Risk with Stop Loss
I just wanted to let you know that I found a way to use the P&L Simulator to solve a dilemma I have been struggling with (Setting a stop loss for a option trade based on Stock technical levels and my Risk level). If I setup the trade in Options Play and then set the "By this date" value to 30 days after placing the trade, I can play with the "Goes to this price" slider until the Resulting Position box shows the acceptable Risk (Loss) value (e.g. 2% of my account). I can then look at that price in the stock chart to see if it makes sense from a technical viewpoint. If it doesn't, I can adjust the price and/or the number of contracts until it does. I chose 30 days out as a reasonable point to evaluate the risk on that trade as the Risk (based on stock price) changes everyday. If my stop is hit sooner than 30 days, I lose less. Greater than 30 days I lose more. Anyway, just wanted to share the strategy of aligning Risk with Stock price I am using.