Hey, my name is Josh, and I'm new here to elitetrader. I would be happy if someone could hopefully give me some insight and point me in the right direction. When I buy an option contract most of the time, even when the stock goes in the right direction, the contract still loses money? Why? I don't understand, and I am kind of confused? Even if I buy a call contract for example, and the stock goes up, I still lose money? I mostly just trend trade and ride the momentum of the market. If anyone could give me any insight, or advice, I would be very appreciative. Thank you. -Josh
You've missed the ABC of options trading. You suffer from time or theta decay, which drain the price of the option while the time goes till the expiration. Take a look at video of OptionAlpha http://www.youtube.com/watch?v=4X3HBFntkds or read a little at OptionMonster http://www.optionmonster.com/education/options_pricing.php
Just to note though, if you are closing trades within a single day and not trading within 2 days of expiration, time decay should not be a large factor if they are going in the right direction. Give us an example of one of your trades?