Discussion in 'Options' started by aeliodon, Mar 5, 2007.
What are they?
Is this a test?
No I'm just phishing.
Phew!! - I started sweating for a sec-
I'd probably say the biggest problems are not fully understanding options (including greeks) and overleverage.
#1 Buying WOTM options just because they are cheap.
you can get a free copy here.
just scroll to the bottom to see.
Bingo, the biggest most often repeated mistake I've made thus far.
What does the W in WOTM mean?
WOTM = Way out of the money. There is a reason the options with strikes that are far out trade so cheap... there is little probability that they will reach those prices, unless you have events like we have had over the last couple of days
Ironic comment given that anyone who was long WOTM puts for the last week on >90% of index products in the world just made huge money. Not that I would trade long wotm options only, but they clearly have a benefit in protecting a portfolio and possibly profiting when volatility is spiking.
My list of 4 biggest mistakes in option trading:
1) Assuming selling options gives you an edge in the markets.
2) Trading options without accounting for volatility.
3) Selling illiquid contracts.
4) Trading options at all for most traders.
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