As you know, when it concerns investing money in the stock market, or any other sort of exchange, there's always going to be a reasonable measure of risk involved. You could make an immense amount of money and retire, or you could turn a loss and lose your shirt with a poor decision.
There are unlimited ways to trade options due to the unlimited number of option trading tips strategies and approaches that can be adopted. This article outlines options trading tips that conservative traders can follow for maximum safety in options trading.
1. Use only money you can afford to lose
This is the most common advice given in options trading and one which most people choose to ignore to their own detriment. Using only money you can afford to lose means that if you hope to lose no more than $200 in a single trade, then you should use no more than $200 in buying options at any one time. The good thing about options is that the leverage it offers allows you to make a significant profit even with very small capital outlays and even if you get it wrong, all you can lose is $200, nothing more... if you follow the next tip.
2. Always buy options or positions with at least 3 months to expiration
Unless you are a sniper sharp stock picker or using credit strategies which you want expire quickly, always buy options or position with at least 3 months to expiration. There is nothing more frustrating to see your positions expire before the stock cash tips starts to move.
3. Use advanced orders to enforce your stop loss
Most people give in to their emotions when it's time to take a loss thinking that the position might come back the next day. We all know what usually happens after that, yes, the position gets held all the way to expiration and then it expires worthless, losing 100% of its value. Yes, nothing is more difficult than trusting your human emotions to enforce stop loss points. That is why you must always make use of advanced orders such as conditional / contingent orders or trailing stop loss to automate your stop loss policy.
4. Trade for profit, not for fun
Most beginners trade options or intraday tips for fun more than profits. Their main aim is merely to use these overly hyped options strategies and see how they work with the aim of making money being secondary. Yes, treating options trading like a hobby and options trading will behave just like a hobby and hobbies cost money. If you don't think a trade has a high chance of turning out successfully, don't make it.
5. Use put options to hedge your stock holdings
Perhaps the best use of put options of all time is to buy them as a hedge against your stocks. If you have stocks which you are holding for long term investment purpose, consider buying LEAPS put options expiring six months to a year out as protection against catastrophic drops.
6. Avoid Out Of the Money Options if you intend to trade with all your money
The reasons why most beginners lose all their money in options trading in one go is because they buy out of the money options with all their money. This means that they will lose all their money even if the stock moved in their favor but not enough to bring the options in the money! Now, bearing in mind that you should only be using money you can afford to lose, buying only in the money options with those money give you even higher protection and lesser chance of losing everything.
If you are searching for top quality Equity Tips, Intraday Tips, Commodity tips for your equity and commodity trading portfolio, then you have come to the right place. Equity Research Lab is an ISO 9001-2011 Registered Company. All services are provided through Message and Instant Messenger please call 8109999233.
There are unlimited ways to trade options due to the unlimited number of option trading tips strategies and approaches that can be adopted. This article outlines options trading tips that conservative traders can follow for maximum safety in options trading.
1. Use only money you can afford to lose
This is the most common advice given in options trading and one which most people choose to ignore to their own detriment. Using only money you can afford to lose means that if you hope to lose no more than $200 in a single trade, then you should use no more than $200 in buying options at any one time. The good thing about options is that the leverage it offers allows you to make a significant profit even with very small capital outlays and even if you get it wrong, all you can lose is $200, nothing more... if you follow the next tip.
2. Always buy options or positions with at least 3 months to expiration
Unless you are a sniper sharp stock picker or using credit strategies which you want expire quickly, always buy options or position with at least 3 months to expiration. There is nothing more frustrating to see your positions expire before the stock cash tips starts to move.
3. Use advanced orders to enforce your stop loss
Most people give in to their emotions when it's time to take a loss thinking that the position might come back the next day. We all know what usually happens after that, yes, the position gets held all the way to expiration and then it expires worthless, losing 100% of its value. Yes, nothing is more difficult than trusting your human emotions to enforce stop loss points. That is why you must always make use of advanced orders such as conditional / contingent orders or trailing stop loss to automate your stop loss policy.
4. Trade for profit, not for fun
Most beginners trade options or intraday tips for fun more than profits. Their main aim is merely to use these overly hyped options strategies and see how they work with the aim of making money being secondary. Yes, treating options trading like a hobby and options trading will behave just like a hobby and hobbies cost money. If you don't think a trade has a high chance of turning out successfully, don't make it.
5. Use put options to hedge your stock holdings
Perhaps the best use of put options of all time is to buy them as a hedge against your stocks. If you have stocks which you are holding for long term investment purpose, consider buying LEAPS put options expiring six months to a year out as protection against catastrophic drops.
6. Avoid Out Of the Money Options if you intend to trade with all your money
The reasons why most beginners lose all their money in options trading in one go is because they buy out of the money options with all their money. This means that they will lose all their money even if the stock moved in their favor but not enough to bring the options in the money! Now, bearing in mind that you should only be using money you can afford to lose, buying only in the money options with those money give you even higher protection and lesser chance of losing everything.
If you are searching for top quality Equity Tips, Intraday Tips, Commodity tips for your equity and commodity trading portfolio, then you have come to the right place. Equity Research Lab is an ISO 9001-2011 Registered Company. All services are provided through Message and Instant Messenger please call 8109999233.
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