Are You Making These Mistakes With Your Options Trading?
Are you an intermediate to advanced trader who wants to make more money trading?
Does it sometimes feel as if trading options is like rolling the dice?
Would you like to learn how to use a more reliable system to turn the odds back in your favor?
If so, then we’ve got good news and bad news.
The bad news is that trading options can be like gambling if it’s not done strategically. To make matters worse, anytime you start to lose money it’s easy to get emotional. And when emotions run high, that’s when traders really start to lose money.
The good news is that by using the right system you can turn the odds in your favor and learn to make more money in any market.
First, let’s go over the “big 4” mistakes to avoid. (Even experienced traders make these mistakes all the time.)
Mistake #1: Doubling-Up on Losers As a human being, you are hardwired to avoid loss. And when a trade doesn’t go your way, this instinct kicks into high gear and can cause you to make some bad decisions.
You know the smart thing would be to take a small loss now and avoid a catastrophe later. But it’s tempting to double-up and try to prove that you were right all along. Unfortunately, this usually ends up turning a small loss into a big one.
Mistake #2: No Exit Plan Want to know why “the house always wins”? It’s because gamblers rarely quit when they’re ahead. And traders make the same mistake by not deciding on an exit-point ahead of time.
Why do so many traders do this? First of all, emotions run high when you’re winning (or losing) big. And these emotions can cause you to make rash—and expensive—decisions. To make matters worse, options also have a time decay effect. According to the CBOE, a full 30% of options expire worthless. (60% are traded out, and only 10% are exercised.) Let this be a lesson to you: decide on an exit-point ahead of time to minimize losses and avoid missing out on profits.
Mistake #3: Not Learning New Strategies Options trading is flexible.
You can make money in all kinds of market conditions. But only if you’re open to using new strategies to match the state of the market. Buying spreads, for example, is one great strategy that works in many different markets. Though their upside is limited, spreads can help minimize losses and neutralize the effect of time decay. So don’t settle for using an “all-purpose strategy” in all market conditions. Instead, make the effort to learn which strategies apply to which markets.
Mistake #4: Waiting Too Long to Buy Back Short Options Many traders are reluctant to buy back the short options they’ve sold. Often they don’t want to pay the commission, or maybe they’re hoping to make a little more profit from the trade.
This is a common mistake that could be costing you big time. If your short option gets out of the money and you can buy it back to reduce your risk, do it. Especially if you can keep 80% or more of your initial gain from the option sale. If you wait too long to buy back your short options, then sooner or later a short option is going to come back to bite you.
Reading a list of mistakes like this can feel overwhelming, and that’s understandable. It’s a lot to keep in your head. Options are complex and it takes willpower, knowledge, and focus to trade them profitably.
How would you like to make this process easier?
At the beginning of this article we said there was good news, and here it is: There’s a way to make options trading easier and more profitable by following a proven system that turns the odds back in your favor.
Following a system is key because it automates your decision-making process. This takes your emotions off the table and improves your chances of profiting on every trade.
So if you’re ready to graduate from intermediate trading and make more money from the market, download The Complete Guide to Options Trading today. Before you know it, you’ll be using advanced strategies to protect & profit in any market. And as a result, you’ll feel more in control of your financial future than ever.
Your portfolio will thank you.