Though my internal indicators are still within a bullish-to-neutral range, after last week’s selloff, traders would do well to prepare themselves for the coming bear. That means stepping up your put options, and making sure you get a good price.
My recommendation is to buy Terex (TEX) October 23 Put options at $1.40 or lower. This is a manufacturing company that’s been on the decline since the beginning of June. On Friday, there were a handful of fills around $1.80, but it’s best to wait for it to drop down again for maximum profits.
After entry, take profits if the stock price hits $24 (Friday’s close was $26.45) or if the option price $2.60. Exit if the stock price closes above $29.90 or the option price reaches $1.00.
Remember, if a profit target is hit intra-day, exit and take profits immediately. If the position closes at or below the stock-based or options-based stop loss, exit the trade the next morning at the open.
Additionally, if an option has neither hit the stop-loss nor the target within three weeks of entry, close the position. I do not recommend holding an option play for more than three weeks.
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