Options Trading Ideas

Some of my thoughts on trading options

Learn first. Trade later
• Take the time to understand how options work
• Recognize when positions are equivalent
• Do not ignore ‘the greeks’

Risk management is essential to success

• Think of risk as you examine various strategies
• Size is crucial. Avoid large position than can kill your account when the worst happens
• Adjusting positions is ‘good.’ It cuts risk and gives trader an improved chance to earn money
• Many new traders blow out an account before beginning to think about risk management

It’s your money

• Do not gamble with profits. That cash is your money
• Minimizing losses is the key to success
• Earning money is the easier part. keeping it is more difficult

Don’t open a new trade because it ‘looks ok’

• Verify that potential profit is worth the risk required to earn that profit
• Make a trade plan

Don’t hold short options into expiration

• The last nickel or dime is for someone else to earn
• Near term gamma is explosive
• Short options can result in rapid, large losses
• Avoid having your fate determined by ‘settlement’ prices for European style, cash-settled options