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[New feature upgrade]One Trick to Help Lower Option Risks

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To the Moo wrote a column · Jul 11, 2023 05:21
Options trading offers the potential for lucrative gains in the markets, yet it's vital to recognize their high-risk nature and to proceed with caution. Mitigating risk in options trading involves employing key strategies that are crucial for success. Here are some suggestions to consider:
Don't be greedy:
One of the most common mistakes made by new options traders is being too greedy. They may hold onto positions for too long or try to maximize profits by taking on too much risk.
To avoid this, it's crucial to have a clear plan in place before entering into any trade. This plan should include a target price, stop-loss levels, and an exit strategy.
Use stop-loss orders:
Stop-loss orders are a popular tool used to limit losses when trading options. By placing a stop-loss order at a predetermined price level, traders can automatically sell their options if the market moves against them. This can help manage your risk and prevent your trades from spiraling out of control.
Use take-profit orders:
Take-profit orders are another type of order that can help manage risk when trading options. These orders allow traders to lock-in profits when the price reaches a predetermined level. By using this strategy, traders can protect themselves against sudden market movements that could erase their gains.
Exciting news! moomoo has introduced an innovative feature called "Attached Order" this feature enables customers to attach stop-loss and take-profit orders while trading options.
This groundbreaking addition allows investors to effectively manage risk by limiting potential losses and securing profits when the option's price fluctuates.
What is an attached order?
When placing an order ("parent order") to open a position, you can choose to set an attached order (also known as a "child order") to close the position when certain conditions are met.
The attached order will not be submitted unless the parent order is fully filled and the trigger price has been reached. Clients may better manage their trading risks by creating an attached order for taking profit or stopping loss.
How it works?
You can choose from the drop-down list of trading field, which includes "None", "Profit Taker", "Stop Loss", or "Bracket". The default setting is "None", meaning no attached order will be placed if you do nothing.
● Profit Taker Order
A profit taker order is a special limit order with an opposite direction to the parent order but the same symbol and quantity as those of the parent order.
The limit price is called the Profit Taker Limit Price. A profit taker order is submitted after the parent order is fully filled and if the Profit Taker Limit Price is reached.
● Stop Loss Order
A stop loss order is a special stop order with an opposite direction to the parent order but the same symbol and quantity as those of the parent order. The trigger price is called the 'Stop Loss Stop Price'.
A stop loss order is submitted after the parent order is fully filled and if the Stop Loss Stop Price is reached. If the option price hits the stop price, the stop order is triggered and becomes a market order to be executed at the market's current price.
Please note this stop loss order is a market order and is not guaranteed to execute near your stop price.
● Bracket Order
A bracket order is comprised of a profit taker order and a stop loss order. Once the parent order is filled, either a profit taker or stop loss order can be triggered depending on which order’s trigger price is hit first. When one order is filled, the other is cancelled automatically.
How do I initiate this type of order?
Step 1: Click on the "Attached Order" drop-down menu on the trading page.
Step 2: Choose one of the strategies you would like to place, like "Bracket" for example.
Step 3: Type your expected price for profit-taker order and stop-loss order.
[New feature upgrade]One Trick to Help Lower Option Risks
In conclusion, with the new stop-loss and take-profit order features on moomoo, traders can now better manage the risks associated with trading options.
Feel free to share your experience of using this feature, we value our customer' feedback and suggestions. We look forward to hearing more about your trading stories.
Disclaimer:
Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Options (https://j.us.moomoo.com/00xBBz) before engaging in any options trading strategies. You may also call our customer service at 888.721.0610 to request a copy of the options disclosure document. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request.
Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options.
Investing involves risks. No matter what type of order is used, market and investment risks cannot be completely eliminated. Limit orders do not guarantee that an execution will occur because the price may never reach your limit price, or there are other orders ahead of yours. Limit orders also risk a "partial fill," an execution of some of the shares in an order, but not all of them, which leaves the unfilled shares as an open order.
Investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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