Hi Trader,

Here are The Top 5 Mistakes Weekly Options Traders Make And How To Avoid Them…

Mistake #1 Not understanding options and how Puts and Calls work. See Module 2.

Mistake #2 No Exit strategy.

This is the single most common thing I see in new traders. They buy a stock  or get into an options trade for all kinds of reasons but never have a plan to sell.

A successful trader always knows how, when and where he’s going to get out before he gets in.

To avoid the mistake of “No Exit Strategy” you should know that, if you are selling a covered call or doing a credit spread, where your breakeven point is and how to get out or unwind the trade.

In a covered call, your break even is your purchase price of the stock minus the amount your received for selling the call. Don’t let the stock drop by more than you receive in call premium.

In credit spreads, anytime the stock moves against you and the spread widens, you are starting to lose money. At this point, you must decide if the move is temporary and it will get back on track and close out of the money on Friday, or if the trend is broken and you need to unwind it.

Mistake #3 Not fully understanding the strategy.

This is a common mistake and it’s not your fault.  The best way to gain confidence to better understand the strategy is to re-read the trader training material and to re-watch the video tutorials and case studies I have created for you within this portal.

 Mistake #4: Fear Of Loss / Trading With The Wrong Money

I can’t even begin to tell you how many people start out with the wrong money. The “wrong” money by the way has nothing to do with any amount of money. It has to do with the type of money.

This part is critical => in order for you to have any kind of real success trading stocks you have to be trading with what you consider “risk capital.”  This means you can’t be using the rent or grocery money to make trades with. This is money you can’t afford to lose… also known as “scared money.” Scared money never wins, period.

My general rule of thumb on how much money you should start trading with is any amount that you could take a lighter to and not cry about it.

If losing this money impacts your life, it’s not risk capital.

By the way, this does not mean you will lose all your money, but once you’ve initially set yourself up to trade only with risk capital, you are far less likely to make emotional trading decisions. This also mentally frees you up to experience larger and more frequent trading profits.

The stock market is a place to make a great deal of money. Many people have made a fortune trading. The reason that you can make money at it is because it involves risk.

Nobody can predict the market’s direction or what a particular stock will do with 100% accuracy. Therefore, you should ONLY trade with risk capital.

You may have heard me say this before, but I don’t just say it as a general warning. I say it because the key to avoiding the emotionally painful and financially costly learning curve that most traders initially go through is in the deeper meaning of that statement. You CANNOT have any type of long term trading success with money that you are emotionally attached to.

It’s impossible. Human nature is such that, our fear of loss is greater than our greed for gain. That’s why, if you’re trading with scared money, you can’t be successful trading because, like I said earlier, scared money never wins.

Mistake # 5. On the wrong side of the market. 

This is a very, very common mistake. The worst part is, no one who makes this mistake even realized they were on the wrong side of the market or they wouldn’t have done the trade in the first place.  Check this out, my research indicates that you can improve your odds of success by 85% simply by trading in the same direction as the broad market. That’s why we always put our fingers on the pulse of the broad market before we look for a stock to use for an options trade.  This is explained in Module 1.

After you know the broad market’s trend then you would trade the same direction on the stock. In a bull market, Bull Put spreads, and covered calls and occasionally buying Calls are the preferred strategies. In a bear market, it’s best to use the Bear Call Spread and occasionally buying Puts.