Trading Bad Habit: What No One Is Talking About
- Hedging most people start without understanding the amount required for options trading and take up wrong trades. Most start with trading naked options mistaking it as better margin utilization. Otherwise, end up buying up deep out of money options without understanding cheap is expensive. The bad habit is trading without hedging replace it with choosing hedged option strategies.
- Another very important tool is Option Greeks most people think this is very complicated and ignore Option Greek completely without realizing how much easy it makes your job for options trading. Stop avoiding Option Greek and starting learning one at a time.
- Option Trading should be done after analyzing certain aspects such as option volume, volatility etc and most people start without looking at the Option Checklist. Download your free ebook for Option Checklist here. The bad habit is not considering who goes into trading option replace it by going through options trading checklist.
- Volatility Index most options traders do not understand how VIX works. Professional options traders strategy assignment start with understanding the vix. Bad habit avoiding VIX replace it with vix as the key to your strategy selection.
- Not giving Emphasis on Options Trading Portfolio for large accounts. Instead of following a single strategy one has to take multiple options trading positions in different underlying ranging from high risk to low risk. bad habit following only one option strategy replace it with multiple options strategy or weekly strategies.
- The second step of understanding option Greek is option adjustment. Adjustment gives you an opportunity to turn a loss making option strategy to turn into profitable. Block the profitability of the profit-making option strategy. The bad habit is avoiding adjustment as an options replace it with considering option adjustment in the strategy itself.
- Most misunderstood or misconception is Delta Neutral Strategy. Managing option Greek is often understood as taking a delta neutral options trading strategy. Delta neutral strategy is always profit-making and does not lead to loss since most of the market information is already factored into the option premium. Definitely certain delta neutral options trading strategy generate consistent income but that is also the reason that at times a single event could wipe years of earnings. The bad habit is blindly following delta neutral options trading strategy replace it with managing delta actively.
- Days to Expiry this aspect is not considered by most options traders. Trading in options just a few days before the day of expiry can lead to high gamma risk. The bad habit is trading very near to expiry replace it by trading 45 DTE or 60 DTE.
Over to You
Look for your trading strategy especially if you are not getting returns over a period of time.
Look for the above points if you find something you are ignoring. You can implement right away and look for positive results over a period of time.
This list is compiled from people who had been seeking clarification on their loss making trades.
Now you should be confident with your bad trading habits and replace them with good once.
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