Extremely versatile and usable in all market Extremely versatile and usable in all market

conditions, options are securities which are used conditions, options are securities which are used

either for speculation or for risk reduction in either for speculation or for risk reduction in

holding an asset. Options can be disastrous if one is holding an asset. Options can be disastrous if one is

not skilled in applying proper financial instruments not skilled in applying proper financial instruments

and more often than not, newbie option traders and more often than not, newbie option traders

tend to repeat the same mistakes over and over tend to repeat the same mistakes over and over

again. Hence, avoid the five common mistakes again. Hence, avoid the five common mistakes

listed below at all cost.listed below at all cost.

1. Not Keeping Your Emotions In 1. Not Keeping Your Emotions In

CheckCheck

It is crucial to keep your emotions in check when trading options,

which is similar to trading stocks, as there is no way for you to

control the market as well as the outcome of any given trade.

Instead of swallowing all your fears in an unrealistically way, you

can learn to control your emotions and actions with a productive,

solid and realistic trading plan that works.

2. Not Having an Exit Plan2. Not Having an Exit Plan

This is one major mistake that should be avoided like a plague.

Regardless of what happens, you should definitely arm yourself

with an exit strategy. On top of minimising loss on the downside,

you should also choose in advance both your upside and

downside exit points as well as the time frames intended for

each exit. Questions such as the amount of profit expected, what

to do with expiring worthless option etc. should be addressed

before trading and not during.

3. Not Having Good Money 3. Not Having Good Money

ManagementManagement

In order to survive as an options trader, you need to have

good money management habits, which is a pretty clear fact.

Do not ever invest money which you cannot afford or unwilling

to lose. Your account will grow continuously so long you make

more money than you lose.

4. Not Having Changeable Strategy For 4. Not Having Changeable Strategy For DifferentDifferent

Market ConditionsMarket Conditions

New options traders should always stay open to learning new market strategies, so as to take advantage of options trading’s flexibility. With it being so flexible, you are then able to trade effectively under all kinds of market conditions. Avoid utilising an all-purpose strategy.

5. Not Trading Liquid Options5. Not Trading Liquid Options

““Liquidity” in the market is defined as having active buyers and sellers at all times, which will subsequently drives the bid and ask prices of stocks and options closer together. Illiquidity in the options market will cause the bid-ask spread to become wider.