The New Year has a way of bombarding us with so many swell ideas on self-improvement. Like the mindless magazine in the checkout line at the grocery store boasting rippled abs in just 10 days. A shopper confidently beams while placing the magazine in the cart alongside the greasy chips, synthetic cheese dip and high fructose cola. Yes, that shopper feels the first step has been taken to make that change. But you know the rest of the story. No realistic expectations. No commitment. No six-pack.
Learning the art of trading options takes a plan with realistic expectations and a solid commitment. None of this happens over night with an options book under your pillow. It takes time and you’ve got to like it. Having money in a trading account doesn’t deem you a qualified trader either. 2013 is your time, if you want it bad enough:
- Understand your trading platform and the important information it provides. Learning how to navigate the platform fully will be an education in itself and allow you to use some of the new found information to enhance your trading decisions. You’re paying commissions. Use it.
- Make a commitment to get to know several bearish, neutral and bullish trading strategies along with the various risk profiles they bring. You want to be prepared to act on your outlook for a particular underlying stock or index. But remember, all of the strategies are great but they are only as good as the performance of the underlying.
- Have a Watch List set up on your trading platform with a reasonable amount of stocks to follow. You’re not Cramer.
- A few things to look at before placing a trade:
- When are earnings?
- What’s trading?
- What’s volatility doing today?
- What’s the price of the at-the-money straddle?
- Do you want to take advantage of market direction, time erosion or change in implied volatility? Then you better learn what the Greeks (Delta, Gamma, Vega and Theta) are and how they affect option pricing.
What didn’t you do in 2012 that you wish you would have done? It’s easy to make promises to yourself but it’s really you who gets hurt if they are broken. Getting better at something including trading options takes time and experience. Sounds cliché but it’s true.
Here’s hoping 2013 is everything you want it to be.