Sometimes it only takes small changes to create massive profits. Here are three that can dramatically transform your options trading.
Make sure you only buy undervalued options and sell over valued options.
Most people just buy or sell the at the money option. No no, not good. You will likely consistently lose money if you buy over valued options and sell undervalued options. You need to stop making this mistake right away! Knowing the valuation of a volume is very important. Would you pay $20 for a loaf of bread? But people do that all the time in option trading. You can learn how to do this at our free Option Success School. Click here to learn how to get a full pay scholarship.
Sometimes more expensive is cheaper
Many options traders trade options that are close to expiration. No question that short dated options are cheaper than long dated options. But the cost per day to own them is much higher than buying long dated options. Remember that short dated options have a very high time decay. Every day an options loses value. But long dated options have very small time decay but options that expire within a month have very high time decay. So holding a short dated option for a month will actually cost much more than holding a long dated option.
Pick the right strategy
You are bullish. Which strategy should you use to make money? Most people simply buy a call. That is often a great strategy but not always. Can you afford to buy a call on AMZN that costs $1500? Probably not. Perhaps you should use a bull spread. But should you use a call or put spread? Or, hey, how about a ratio spread! Or a covered call? There are many different bullish strategies. They all have their pros and cons. You should pick the best one to maximize profit and minimize risk.
You can now be bullish but use the guide to easily see which bullish strategy is your best one. Maximize profits while minimizing risk