 Hey everyone, welcome to another video lesson from NavigationTrading.com. In this video, I want to talk about the use of stop losses when trading short strangles. So what we're looking at here is the E-Delta Pro backtesting software, and so let's run through the criteria of this study. To start with, we're using Symbol SPY. We're looking at a five-year backtested study on a 20 delta short strangle. We are entering trades with 45 days to expiration, and they need to have an IV rank of at least 30% to enter. We are closing our winning trades at 50% of max profit, and then the one variable we are going to change with the different examples is the stop loss. So the first one we're looking at is using a stop loss of 100% or one times the initial credit. So if your max profit on a trade when you enter is $1,000, then we're saying you're going to close the trade when you get to a point of being down $1,000, okay? So 100% stop loss. So let's take a look at what that looks like. You have a realized return of over $21,000. Your average profit per trade is $22, and your average P&L per day is $0.97, with a return on capital of 19%, okay? So it's profitable. Let's take a look at the next example. The only thing we're changing is we're changing our stop loss from 100% to 200%, okay? So we're two times your initial credit. So if your max profit or initial credit is $1,000, you're going to close the trade out once you hit a loss of 2,000, okay? So the results are a little bit worse. So total realized return $12,716, average profit $13 per trade, $0.54 is your P&L per day, with a return on capital of 10%. Next stop loss is 300%, okay? So three times your initial credit. You've got a realized return of over $16,000, average profit per trade $16, P&L per day of 65 cents, with a return on capital of 13%. Okay, now the next example is showing no stop loss. Now we get questions from members in the community all the time about, you know, why don't you use a stop loss? Why extend duration? Why roll? Why, you know, how can you not use a stop loss when it's an undefined risk trade? And here's why. Look at this significant difference. With no stop loss, we've got a return of over $53,000, average profit per trade of $55, and look at the P&L per day, $2.13. We had 97 cents, 54 cents, and 65 cents of P&L per day with the different stop loss scenarios, but with no stop loss, we've got $2.13 per day. It's over twice as profitable as any method using any of the stop loss scenarios. Return on capital jumps up to 47% and just a much more profitable way to trade these short strangles. The way that you manage your risk when you're trading these naked options or uncovered options is you've got to keep your position size small. You will realize these profits over time, but if your trade size gets too big relative to your account, that's when you can get hurt with these types of strategies. The other factor you do want to consider and when using one of these stop losses might make sense is if you are trading a smaller account and you want to trade a short strangle like this, you really have to have that risk defined mentality in mind either by actually defining your risk using an iron condor instead of a strangle or using one of these theoretical stop losses, 100%, 200%, 300%, and yes, they're not as profitable, but if you have a smaller account and you're going to trade a short strangle, then maybe utilizing one of these stop loss scenarios makes sense for your specific account. But this is why in our size account, we're trading for the alerts, we do not use stop losses, and you can see why is because the scenario of not using stop losses is a much more profitable way to trade. I hope this is helpful. If you want to learn more about what we're doing at Navigation Trading, just go to navigationtrading.com. Talk to you next time.