1- Only
buying low priced
out-of-the-money
options
This is perhaps the
most common mistake
in options trading.
Most people think
that cheaper is
better, but in the
case of
out-of-the-money
options that is not
the case. The odds
are low in turning a
profit in these
options.
2- Neglecting
time decay and
premium levels
Many beginner
traders buy options
that are close to
expiration thinking
that cheaper is
better. Also if you
do not pay attention
to deadlines, you
may pay more than
what the premium is
worth when buying,
or receive less for
an option.
3- Thinking that
good
market timing
covers all bases
There many factors
at play when trading
in options and
timing is just one
of them which cannot
overcome all the
other factors by
itself.
4- Feeling that
your losses are
always limited and
small
This is not the case
for all options
trading. For
example, you could
be in a heap of
trouble if you think
that to be the case
and you are involved
with selling stock
options without
possessing the
underlying stocks.
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