The August 14th Weekend Update set out a trading strategy for using a 50% trailing stop to lock in trading profits. The analysis below is a real time example of how the strategy would work taken from a recent TSLA (180 minute) Buy Signal on August 24th. Note: This trade was not sent out because TSLA was and is still on its June 23rd Buy Signal @ $656.57 (see chart below). August 23rd Buy Signal (Open) @ $707.45 Option Entry: Sep 17th $720C @ $23.84 August 31st TSLA = $738.41 = +30.96 = +4.38% Option High: $34.00 Net Gain: +$10.16 = +42.62% Trailing Stop = 42.62%/2 = 21.3% = $28.90 In other words, if the Call purchased above were to fall to $28.90 before expiration then EXIT. Otherwise hold until expiration. This is not as complicated as it may first seem, especially if you go line by line above and understand the simple math. As of today the call purchased on August 23rd is up 42.62% and the 50% trailing stop locks in a gain of 21.3%. There is always the alternative of pocketing the 42% gain now and taking the rest of the week off. There is a lot of time for TSLA to run higher for an even better return, but this way if the stock should stumble the 50% trailing stop exit strategy preserves a profit. Also of interest is that with shares of TSLA up 4.38% the call is up 42.62%, for an option percentage gain about 10X the gain of the underlying shares. This is typical for "next month just out of the money options."
