Advice for Options Traders
I've been investing for a long time, and more recently I've had some great success in the world of stock options. While they're risky, they can also be an extremely rewarding means of making money if they're handled right.
I'm going to share a few things I've learned along the way in an effort to help you to as much success as you can possibly find. The world of options is an extremely tempting one, but a dangerous one at that. Some traders end up losing their whole investment on one bad trade.
You may or may not be aware of the fact that options lose value over time. This is known as time decay, and it basically means that the longer it is until an options contract expires, the higher of a price it will sell at relative to nearer contracts at the same strike price.
As you get closer to expiration, that time premium gradually shrinks over the weeks and month. Therefore, buying and holding is never really a wise options strategy. You should generally look to make some short term trades whenever you're buying and selling options.
Additionally, the concept of protecting your investment on an option trade is a really important one. Too many people throw all of their eggs into one basket, not accounting for the possibility of the opposite of what they expect.
It might end up cutting down on your profits a bit if you win, but this will really hedge you if you lose big time. I've seen way too many people lose everything they invested, simply for the fact that they failed to hedge.
Sure, you might not make as much money as you otherwise would have, but investing something like 5 or 10% in the opposite outcome can ensure that you lose much less than all of your investment should your option never hit its strike price.
By adhering to these tips, I'm sure of the fact that you'll be well ahead of the typical novice. - 23199
I'm going to share a few things I've learned along the way in an effort to help you to as much success as you can possibly find. The world of options is an extremely tempting one, but a dangerous one at that. Some traders end up losing their whole investment on one bad trade.
You may or may not be aware of the fact that options lose value over time. This is known as time decay, and it basically means that the longer it is until an options contract expires, the higher of a price it will sell at relative to nearer contracts at the same strike price.
As you get closer to expiration, that time premium gradually shrinks over the weeks and month. Therefore, buying and holding is never really a wise options strategy. You should generally look to make some short term trades whenever you're buying and selling options.
Additionally, the concept of protecting your investment on an option trade is a really important one. Too many people throw all of their eggs into one basket, not accounting for the possibility of the opposite of what they expect.
It might end up cutting down on your profits a bit if you win, but this will really hedge you if you lose big time. I've seen way too many people lose everything they invested, simply for the fact that they failed to hedge.
Sure, you might not make as much money as you otherwise would have, but investing something like 5 or 10% in the opposite outcome can ensure that you lose much less than all of your investment should your option never hit its strike price.
By adhering to these tips, I'm sure of the fact that you'll be well ahead of the typical novice. - 23199
About the Author:
For more writing by this author, read his blog about cheap worldwide travel insurance and single trip holiday insurance.
posted by X - Men @ 7:56 AM
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