AR Factor Quote

I’ve been investing for a long time, and more recently I’ve had some great success in the world of stock options. While they’re risky, they can also be an extremely rewarding means of making money if they’re handled right.

If you’re new to the trading world, or even experienced but find yourself struggling, I’d like to give you a few pieces of advice that I think will help you out in your quest to become a great trader. Follow these tips and you’ll be in better shape when it comes to trading options.

The first thing I’d like to talk about is the time decay factor. Options tend to deteriorate in value over time due to the fact that as you’re further out from the expiration date, the likelihood of volatility is higher.

As you get closer to expiration, that time premium gradually shrinks over the weeks and month. Therefore, buying and holding is never really a wise options strategy. You should generally look to make some short term trades whenever you’re buying and selling options.

Additionally, the concept of protecting your investment on an option trade is a really important one. Too many people throw all of their eggs into one basket, not accounting for the possibility of the opposite of what they expect.

Try buying a few contracts in the opposite direction. That way if you lose out big time, those contracts will win big.

Had they hedged by giving up just a few dollars, they would have kept 90% of what they lost.

The last thing you want to do is lose your entire investment with options. Sometimes, unfortunately, this happens if your option never surpasses the strike price.

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