Using stops gets more complicated when trading options because options tend to be more thinly traded. So you might set a stop for $3 on an option that has a bid of $3.10 and and ask of $3.30.
As the underlying stock declines, the bids and asks may decline together without ever being met. So the ask might go to $3.20 when the bid is at $3.00, $3.00 when the bid is at $2.75, etc. If no options are actually traded in that range, you can see how the trend might continue until the options are worth much less then your stop price. The option might not actually trade until the the bid and ask are much lower.
The intent of your stop was to place your order when the bid got down to $3.00 or lower, but the possibility that the option doesn’t trade at that level means that your stop is useless. So pay extra close attention if you use stops for options. You can’t rely on them to protect you nearly as well as you can for more heavily traded stocks.
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