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Of course, there’s more, but these strategies are the best place to start. Moreover, narrowing your focus to a single objective will help you make the right decision on which option strategy to use.
Remember, options expire and therefore part of their value declines with the passage of time. And if you’re buying, you typically should not hold them to their expiration.
Finally, you should always establish a clear objective ahead of time. This will help you determine when it’s time to close your position.
Step 2: Determine Your Risk/Reward Payoff
Before you enter any trade, it is important that you understand your risk/reward profile. Successful traders will always understand this at the outset of every trade.
The risk/reward profile should be in line with your appetite for risk and your level of experience. If you are a conservative investor, then supercharged leverage may not be suited to you.
Some options strategies are in fact rather suitable for conservative investors. Regardless, every popular options strategy has a well-defined risk and reward profile, so make sure you understand it thoroughly.
Read on for the final steps… | | | | |
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