|
As a
trader
you
should
be
aware
of
the
ways
in
which
you
could
lose
money.
Avoiding
money
losing
situations
will
significantly
enhance
your
potential
profitability.
Here
are
some
common
mistakes
when
it
comes
to
trading
options:
1-Only
buying
low
priced
out-of-the-money
options
This
is
perhaps
the
most
common
mistake
in
options
trading.
Most
people
think
that
cheaper
is
better,
but
in
the
case
of
out-of-the-money
options
that
is
not
the
case.
The
odds
are
low
in
turning
a
profit
in
these
options.
2-
Neglecting
time
decay
and
premium
levels
Many
beginner
traders
buy
options
that
are
close
to
expiration
thinking
that
cheaper
is
better.
Also
if
you
do
not
pay
attention
to
deadlines,
you
may
pay
more
than
what
the
premium
is
worth
when
buying,
or
receive
less
for
an
option.
3-
Thinking
that
good
market
timing
covers
all
bases
There
many
factors
at
play
when
trading
in
options
and
timing
is
just
one
of
them
which
cannot
overcome
all
the
other
factors
by
itself.
4-
Feeling
that
your
losses
are
always
limited
and
small
This
is
not
the
case
for
all
options
trading.
For
example,
you
could
be
in a
heap
of
trouble
if
you
think
that
to
be
the
case
and
you
are
involved
with
selling
options
without
possessing
the
underlying
stocks. |
