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On Friday I talked about the mindset I use in rising markets: lean bullish, manage risk like an adult, and aim to be net-positive over the run.

Today, I want to go one level deeper and explain how I manage losers — specifically why my default with defined-risk debit spreads is to do nothing during the early drawdown, and the one case where I do like a stop.

My Default With Defensive Spreads: No Discretionary Stop

When you buy a defined-risk spread, you already know your worst-case. The way I trade, the math improves when you give the position time to reach the target.

Cutting early with a discretionary stop usually reduces the win rate more than it saves on losers. That’s why I prefer to stay mechanical and let the structure work, rather than making a “feel” decision in the middle of a red day.

Two practical notes help this make sense:

• Time profile: With this type of spread, the position reacts to price without getting chewed up by the kind of time decay you see on naked options. Give it a chance, and a normal bounce can restore value.
• Living risk/reward: If a spread is down big, the remaining risk is what it’s worth now, not what you paid. That flips the real-time risk/reward in your favor if price recovers (e.g., risking ~$140 to make ~$700 from that point).

Because of that, my default is to trust the system, avoid mid-trade tinkering, and let the probability edge play out.

The Exception: When A Stop Does Help

There is one setup where a stop can improve results: aggressive, short-window, out-of-the-money directional trades. These are “high-octane” attempts where I’m asking for a quick move. In that lane, a stop can keep me from throwing good capital after a plan that didn’t trigger fast. I said this clearly: it’s rare for me—but in that more aggressive style, the stop made the curve better in testing.

How I Apply This So It Stays Stress-Free

• Label the lane first. If it’s a defensive spread, I’m patient and let time work. If it’s an aggressive short-window shot, I size smaller and consider a stop.
• Stay mechanical. I set targets up front, avoid ad-hoc exits, and resist the urge to “fix” a red P&L mid-trade. The goal is consistency, not perfection.
• Remember Friday’s principle. It’s okay to be wrong if the trade management and risk management make sense. One rough patch shouldn’t erase weeks of work.

At the end of the day, with defined-risk spreads, my default is no discretionary stop — give the trade time to work.

But if I intentionally step into a short-window, aggressive idea, I’ll change the rule, use smaller size, and I may use a stop to keep it honest. That’s how I protect the edge without pretending every setup is the same.

— Nate Tucci

P.S. See setups like this and much more every weekday at 10am and 3:30pm Eastern on Opening Playbook & Closing Playbook. Don’t miss it!