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I'm bit new on Option Trading and want to ask your opinion/strategy on certain situation.

Say, the stock price is $110 and I sold a Put at a strike price $95 and expiry after 60days. After 3 or 4 days, if the stock price comes down to $100, the premium goes very high and exceeds my potential Stop Loss level (say 30% of the premium that I collected), even though there's a good chance that the stock won't reach strike price and the contract would expire worthless. but, before the Expiry date, my unrealized loss is very high already.

In such situation, what would you do? would you close the position considering it crosses the Stop Loss or wait for the chance of the contract to expire worthless?

Thank you in advance.

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    "what would you do" is trending towards direct financial advice, which really is off-topic for this site. – Grade 'Eh' Bacon May 25 at 19:56
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AFAIC, selling short puts is appropriate for an investor who is willing to acquire the stock at a lower price (strike price less premium received). If assigned, you get your stock and if not, you earn some income for your effort.

Although you get a larger premium for selling more time (60 days out), you're not taking advantage of the increased rate of time decay closer to expiration and you have reduced your ability to defend your position by rolling down and out for a credit if the underlying moves against you.

I think that risk defined strategies such as spreads are more suited for trader. A short put has an asymmetric risk/reward (small profit, large potential loss) whereas a spread has a more balanced R/R. It also requires less margin and has a higher ROI.

The question boils down to are you an investor or a trader? If it's the latter and your trading strategy includes stop loss parameters then you should adhere to that unless your outlook has changed after the $10 drop.

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[W]ould you close the position considering it crosses the Stop Loss […]

The definition of the phrase "stop loss" is that if the actual price goes beyond the stop loss price, then the trader will close the position. Therefore, the answer is obviously "yes."

If you say to yourself, "my stop loss price is $30," but you don't intend to close the position when the price reaches $30, then actually, your stop loss price is not $30.

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