Most investors who are looking for ‘tips’ for option trading success have the wrong perspective. Instead of trying to work out some options trading strategies that fit their profile, they seek tricks, special techniques, or ‘can’t-miss’ gimmicks. The truth is: There are no such things.
We’ve been experiencing a near 8-year Bull Market (since March 9, 2009) and while stocks have made good profits, options are still the best investment vehicles around. While stock shareholders have to endure periods of pain when their shares dip, options traders can take advantage of those dips and profit even greater on the bounce than the shareholder does.
Heading into 2017, options trading strategies have already had to be adjusted as we have a new President now, have seen a shift from what wasn’t working to now is, and some global headwinds to come from proposed policy changes. One thing which is certain is that those who have some or all of the nine success tips as the main part of their options trading strategies will prosper.
Option Trading Strategies:
Here are nine easy tips for new options traders to follow if they want to be successful.
1⃣ Proper Prior Planning Prevents Piss Poor Performance
Options are best used like sniper bullets, not shotgun pellets. Stalking a ticker or group of tickers and knowing all the pivots and resistance/support levels will provide for less trading, but with much better overall results.
2⃣ The More Trusted Eyes, The Better
Many guys try to get along trading options on their own and might get lucky doing it. Those who are successful at doing it for a living have a group(s) they can rely on to see what they miss.
3⃣ RESPECT & Manage Risk Carefully
There is a time to look further out and a time to play the weeklys. When dealing with the weeklys, even though you are right as rain, managing the overnight unknowns is best managed by simply closing the trade before the end of the day.
4⃣ Be Good With Your Math
You know you’re buying power, what you need to know now is your break-even point based on the number of option contracts you trade. 100 out of the money cheapies might need a much bigger move on the asset compared to fewer contracts at or near the money.
5⃣ Never Self Destruct
You can’t go broke if you don’t blow up your account. Every trader will take heat or hits, but if you religiously stick with a stop loss that fits you, you will always live to fight another day. Being involved with a good group of traders who have your back will help with this when it comes around.
6⃣ Don’t Expect Miracles
“Trade what’s in front of you” is the best way to run your business (yes, your trading is Your Business) – Hope, Wish & Pray are three of the bad words in options trading. Miracles will happen, usually once or twice a month, and when they do, be a part of it rather than try and predict it.
7⃣ Learn, Learn, Learn
The markets are constantly evolving and the algorithms used by all the mass transaction houses changes from time to time. Stock setups, different chart studies, charting plots – each weapon you add to your arsenal and perfect will continue to provide better results than just following the crowd.
8⃣ Don’t Chase
Letting your trade set up and come to you is the simplest way to both limit stress and to maximize your efforts. There are 225 trading sessions in a year, 390 minutes in a regular session, so if you have a plan to trade, trade the plan and let the trade come to you.
9⃣ Forget About The Money
Many new traders try and judge their progress on the amount of money they make rather than the effective execution of their trades. Another way to really hurt your growth is to compare your profits to others who have been at it much longer than you and have deeper resources. Every trader started somewhere, but those who focus on the trade are the ones still doing it.
Keep these nine success tips as part of your options trading strategies while you constantly adjust what works and what works better.