Monday, September 10, 2007

 

Trading Rules

1. Buy options that have at least 3 months expiration on them. One month expirations are a bit too volatile for me.
2. Don't fight the trend.
3. Respect stop loss. I'm thinking of keeping it around 20% for options.
4. Don't average down.
5. Don't let day trades become swing trades.
6. Don't hold options through earnings, unless it's an earnings specific play.
7. Don't buy deep in the money options on volatile stocks, especially if the stock price is in triple digits.

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Comments:
AJ,

I know you would do better over the long-term of you tried selling option premium, rather than buying it.

I'm not talking about selling naked options, but instead of buying calls, if you were to sell out of the money put spreads, time becomes your ally instead of an enemy.

Of course, profits are limited, but so are losses. And the best news is that you would increase your percentage of winning trades.
 
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