Spread Strategies Performance 2015

Dec/Jan
2015
+7.9%
Jan/Feb
2015
+6.0%
Feb/Mar
2015
+12.3%
Mar/Apr
2015
+8.1%
Apr/May
2015
+6.1%
May/Jun
2015
+4.4%
Jun/July
2015
+3.9%
July/Aug
2015
+12.3%%
Aug/Sep
2015
+5.7%
Sept/Oct
2015
+8%
Oct/Nov
2015
+6%
Nov/Dec
2015
8%

Here are nine easy tips for new options traders to follow if they want to be successful.

  • Options are best used as risk-reducing investment tools, not instruments for gambling. (Read my article, why trade options?)
  • Use the options Greeks to measure risk.
  • Manage risk carefully. Do not hold any position than can – in the worst case scenario – cost more than you are willing to lose.
  • Be careful about the number of option contracts you trade. It’s easy to over-trade with inexpensive option contracts – especially when selling.
  • Don’t go broke. Never allow an unexpected event to wipe out your account.
  • Do not expect miracles. Do not buy options that are far out of the money just because they are ‘cheap.’ The chances of success are tiny. Not zero, just tiny.
  • Selling naked options is less risky than buying stock. But, like stock ownership, there is considerable downside risk. Exception: It’s reasonable to sell naked puts – but only if you want to buy the shares, if assigned an exercise notice.
  • Limit losses. The most effective way to accomplish that is to buy one option for every option you sell. That means selling spreads, rather than naked options.
  • Hope is not a strategy. When a position goes bad, consider reducing risk. Doing nothing and hoping for a good outcome is nothing more than gambling.

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