An Especially Good Rule For Options Traders
Source: Pixaby
Don’t do stupid things. That’s a good rule for life in general. But, it’s an especially good rule for option traders.
Like most good rules, though, we don’t really understand their importance until we break them. And when it comes to trading options, doing stupid things can be an expensive lesson.
The options market was created so investors could reduce risk. Options allow investors to hedge their positions, and to risk much less money than if they bought a stock outright.
But like most good ideas on Wall Street, options quickly turned into vehicles to “get rich quick.”
So, we forget about the “risk” side of the equation, and we focus only on the “reward” side. We get caught up in the allure of fast gains. We take on bigger positions than we should. And then we blow up our accounts.
That’s stupid. And, that’s also why many folks who’ve traded options this way will tell you that option trading is risky.
But, it’s not the option that’s risky. It’s the strategy…
This post originally appeared at Jeff Clark Trader.
Category: Options Trading
