Options Trading Mistake #6: Waiting too long to buy back your short options

This mistake can be boiled down to one piece of advice: Always be ready and willing to buy back short options early. Far too often, traders will wait too long to buy back the options they've sold. There are a million reasons why: You don't want to pay the commission; you're betting the contract will […]


How to Avoid the Top 10 Mistakes New Option Traders Make

Option trading is a way for savvy investors to leverage assets and control some of the risks associated with playing the market. With options, it’s possible to profit whether stocks or going up, down, or sideways. You can use options to cut losses, protect gains, and control large chunks of stock with a relatively small […]


Investing in Options: A Beginner’s Guide (Part 1)

Options are a versatile financial instrument for investors. They are also complex and somewhat risky. It's important that you understand the basics of option trading strategy before diving in. What is an option? Options are contracts that give you the right to buy or sell an asset at a fixed price (strike price) for a […]


Options Trading Mistake #7: Failing to factor earnings and dividend dates into your strategy

It pays to keep track of earnings and dividends dates for your underlying stock. For example, if you've sold calls and there's a dividend approaching, it increases the probability you may be assigned early. This is especially true if the dividend is expected to be large. That's because option owners have no rights to a […]


Options Trading Mistake #8: Not knowing what to do if you’re assigned early

If you sell options, just remind yourself occasionally that you can be assigned. Lots of new options traders never think about assignment as a possibility until it actually happens to them. It can be jarring if you haven't factored in assignment, especially if you're running a multi-leg strategy like long or short spreads. For example, […]


Investing in Options: A Beginner’s Guide (Part 3)

In the options world, there are two types of volatility: historical and implied. Historical volatility refers to how much the stock price fluctuated (high price to low price each day) over a one-year period. Since it's historical, this figure refers to past price data. If the number of data points is not stated (for example, […]


Options Trading Mistake #9: Failing to use index options for neutral trades

Individual stocks can be quite volatile. For example, if there is major unforeseen news in one particular company, it might well rock the stock for a few days. On the other hand, even serious turmoil in a major company that's part of the S&P 500 probably wouldn't cause that index to fluctuate very much. What's […]


Investing in Options: A Beginner’s Guide (Part 4)

Speaking Greeks For option traders, the Greeks are a series of handy variables that help explain the various factors driving movement in option prices. Although the Greeks collectively indicate how the marketplace expects an option’s price to change, the Greek values are theoretical in nature. There is no guarantee that these forecasts will be correct. […]


Buying a Put Option vs. Short Selling

If you’re bearish on a stock, you can try to capitalize on your position in a few ways: Sell the stock, if you own it. Sell the stock, even if you don’t own it, by borrowing shares via your brokerage firm. At a later date, you can buy the shares (hopefully at a lower price) […]


Options Trading Mistake #1: Buying out-of-the-money (OTM) call options

It seems like a good place to start: buy a call option and see if you can pick a winner. Buying calls may feel safe because it matches the pattern you're used to following as an equity trader: buy low, sell high. However, buying OTM calls outright is one of the hardest ways to make […]

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