Stop Loss On Max Profit

#1

Can someone please explain me how this is 1:1 SL on max profit?

Thanks.

#2

If you are willing to risk $ 31.40 to make $ 31.40 you will let the market go that much against you, but you have to factor in the money you win on the other side of the trade.

#3

Ok but if I hit SL on 1 side and make max profit on the other overall it is still a loss so with this sort of risk vs reward how can this be profitable strategy?

#4

Condors and butterflies are range bound strategies, meaning you have an expectation that the market will stay inside an certain range hi to low. You can apply these when you think the market will be flat during a certain time or when you think there is excess premium compared to the expected movement (news announcements for example). The stop loss is there to keep you from getting slaughtered when you are wrong.

#5

Lets say I set up my Sl at breakeven so when its hit do I need to close the other position or can I leave it till expiration? Last time when I closed it I lost money so Im not really sure how to do it right. Thanks

#6

When you close one side at a stop loss or break even point the calculations assume that your’e collecting the full value on the other side. You will only collect 100% of the possible profit on a contract at expiration. Closing out a trade or leaving it on may depend on the individual trade as well as your judgement on whether it’s worth it to keep the trade on.

For myself, it would depend on how far the market would have to move back against my winning position as well as how much time is left. If a market has to move 100 ticks against me in 10 minutes for my winning side to get hit, I’d leave it on. If a market has to move 20 ticks against me in 2 hours, then I’m probably just going to exit the full trade.

#7

The breakeven calculation is based upon expiration.

The 1:1 is also based upon expiration.

Depending on how much time is left it may be a bit better or worse as the premium will impact it.

I normally exit both sides when exiting one side. So my stop loss and take profit are one and the same.

Regarding last time when you closed it you lost we would need a lot more details to help :slight_smile:

1:1 if it hits that price would mean that you lost the max profit ie if max profit is 40 you lose a net - $40 hence 1 to 1

Its a profitable strategy if the market stays within the breakeven range.