Options area depreciating asset. The
closer you get to expiration, the more the price of the asset will go down. So as the the buyer, it is really helpful to keep this in mind. Some investors sit on positions even when they are loser, hoping that it comes back.
Don’t do that. Sellout of a loser and you will be much happier in the long run.
4. Do not get emotional about your positions. This is one of the hardest things fora trader to do. It is so easy to fall in love with a position that more than anything else, this is the hardest rule to follow. If you are sitting on a winner and tell yourself it will get better, don’t listen. Sell it, take the profits and be happy.
Bears make money, bulls make money and pigs get slaughtered. Or better, don’t snatch defeat from the jaws of victory.
5. Rollover little doggy. If you must stay in the market, think about selling one position and buying another at either a higher/lower strike or a further out expiration. At least in this scenario you will take some money off of the table. You do not want to sweat a position hoping for the right conclusion.
Be in control, because that’s precisely why options area great investment tool. The key to this post is that you need to discipline. If you lack that discipline you will not bank profits. And since banking those profits is the key objective to trading, gain discipline. Makes sense doesn’t it
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