4. Buying a PUT- You pay a premium price based on the STRIKE price you chose. With PUTS you get paid when the underlying stock price goes down
How to avoid blowing up your account trading OPTIONS
(A thread)
1. Becoming consistently profitable trading OPTIONS takes practice and discipline.
2. Trading Options is similar to trading stock, YOU are in control of your profits per movement (up or down) in the underlying.
4. Buying a PUT- You pay a premium price based on the STRIKE price you chose. With PUTS you get paid when the underlying stock price goes down
6. The goal is to buy a premium and resell it for a higher premium when the trade works
7. Like basic stock trading, you want to scale in and out of your position
10. Don’t let the premium price dictate which strike you chose.. the higher the premium, the less risk/ volatility that trade will see!
12. Delta is what your premium will pay per dollar movement in underlying.
Ex. Delta .5 pays 50c per dollar movement in underlying
So if original cost =50$ premium,
1$ move up in underlying pays .50 or 100% trade
14. To avoid that risk, just trade a further expiry on the same strike!
As the OTM becomes ITM, sell your original ITM and collect the difference in premium. Your old OTM is now your new ITM, and you can pickup a new OTM option if you still have conviction/want to add more
17. THETA comes into play here (price per day to hold the contracts) further expiry less theta
18. More detailed basics refer here https://t.co/zs18kSwUFc
What Are Stock Options,
— Dr. BullShark\U0001f988 (@DrBullShark) August 17, 2021
A How To Guide by @DrBullShark
1. The two main types of options are calls and puts.
->Calls give the right (but not the obligation) to buy 100 shares of a stock at a certain price (called strike) by a certain date(expiry)
https://t.co/1TF6l1oKfk
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