• Option Trading: Common Mistakes People Make

    by
    punnu
    Published on 12-07-10 06:16 AM  Number of Views: 324  
    1 Comment Comments
    Common Mistakes People Make In Option Trading

    • Generally a small investor buys a option suppose at 5 ,when it becomes 6 or 7 he immediately sells it, but never sells when it becomes 3, even wait for last minutes on the expiry day hoping some miracle to happen, thereby losing his entire investment.
    • Normal stop-loss theory will not work in case of option. It depends on the value of underlying and the days left in expiry.
    • Buying and selling options at right price is very important as there is no much liquidity in most of time, so premiums are arbitrary, generally fixed to take small investors for a ride.
    • Never buy options when News broke by so called "BREAKING NEWS" on television, as premiums are already up much before releasing the news.
    • Never invest your whole allocated money in one option call hoping to multiply your capital overnight, as risk is equally high.
    • Make disciplined investment in options at regular intervals with a little diversification.

    So beware, before making a position in Options. It is NOT an easy money making technique as it is interpreted usually.
    This article was originally published in forum thread: Option Trading: Common Mistakes People Make started by punnu View original post
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    Comments 1 Comment
    1. investorindia's Avatar
      investorindia - 12-07-10, 07:42 PM
      Also most of the ppl don't like to put in a stop loss or trailing protective stop. They just "watch it." ... and that's where they make a BIG mistake
      Reply
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