Pls Share Common Mistakes in Option Trading

[krishnamurthyu]

Hi,
I am novice to Option Trading. Every one has gone through the learning process stumbled and making profit. What are the common mistakes [ both beginner/expert] done in trading options. If we know them we can avoid them

Expert and seniors I kindly request you to put in your points/knowledge for the benefit of beginners like us.


Thanking in Advance
Murthy

 

[gausap23]

Hello Mr.Krishnamurthy,
First of all Options trading is easier to do on Nifty contracts as they more Liquidy than individual stock options.Also its relatively less complex to understand Nifty movement as compared to individual stock because any adverse/favourable news can impact significaly in the negatively/positively direction in the case of individual stock, whereas Nifty consists of Top 50 companies and its not easy to move it in either direction.
Also since individual stocks are much more volatile than Nifty,its ( nifty ) also less riskier.Stop Losses get trigerred easily in case of individual stocks.
Remember always Put Stop Loss whenever you use Future and Options to limit your losses.
Never be greedy in this play,collect your profits,if any,and be happy.Dont try to play to frequently.
And ALL THE BEST
If you still want more knowledge and suggestions on Investing/trading, we can provide suggestions.
My E-mail :[email protected]

 

[kannamthanam]

on a lighter vein....the common mistake is that when one buys a call option the price goes down , when one buys a put option price goes up and if one buys both the price stays same

 

[CreditViolet]

I would strongly suggest you to read Nicholas Nassim Taleb's Dynamic Hedging
Good Luck Mr.Krishnamurty(i) ( Jiddu & UG Krishnamurti are my fav philosophers )

CV

 

[ivanboesky]

"The Four Biggest Mistakes in Option Trading" by Jay Kaeppel is a must read for option trading beginners.

 

[beginner_av]

Ya baby...here's one...hope that helps

Traded Ranbaxy about 9 months back. Wrote 1 lots @420 CA option, when stock was at 418. While stock was going down, at around 408, squared off 420CA, got greedy, wrote 2 lots 410CA for Rs 7 Rs 8. Stock came down to 403. Next day unconfirmed news of betapharm acquisition came on CNBC, even though stock rose to 412, it closed the day at 409. Next day news was confirmed, but stock closed only at 410-411. DID NOT SQUARE OFF THE CALLS, thought that stock did not react to news...so it is weak. NEXT MORNING, which was also settlement day...ha ha ha...STOCK OPENED AT 420..and closed at 448...LESSON OF LIFE...when writing options..at the first sign of clouds, take cover.

 

[sk_gharde]

From My experience. Good knowledge of Technicals is basic before you start in options. I suggest first you gain good experience in technical analysis and then slowly start option trading.

 

[beginner_av]

good suggestion...but believe me, it wont work...either trade with technicals with stock or futures or trade OPTION STRATEGIES.

 

[abhishekdaaga]

Just read option BOOKS by experts u get to know about Option stratergies where u will be in a WIN:WIN status......& loosing chances will be less even in a case of mkt crashhhhh.......maximum u can lose up brok if u follow them properly & act accordingly....
If u people want books on option e-books plzzz mail me @ [email protected]

 

[beginner_av]

Books give u option strategies, but do not give u how to run when they backfire...so my practical exp is that if u have a strategy, close the whole of it...DO NOT KEEP A PART OF IT OPEN.