1. Option Strategies range from high risk to low risk. The risk on each side of an options trade can work to your advantage. Options provide you with a wide range of choices.
2. Option Buyers can profit whether the market rises or falls; for example, The Call Option and The Put Option; the difficult part is knowing ahead of time which direction the market will take.
3. Stock Price Movement - It is not enough to accurately predict the direction of a stock's price movement. For option buyers, that movement has to occur within a very short period.
4. "The House Wins" - When selling options, the seller benefits from time. The options seller, just like the casino owner, benefits from selling an option as opposed to buying an option.
5. Market Forces - Market forces affect the value of a stock. An option itself has no actual fundamental value. An option's market value is formulated on the stock's fundamentals.
6. Fees and Charges - While setting option trading standards for yourself, make sure you take into account any fees and charges for a trade. This will help you set a profit level that takes into consideration any fees and charges and your trades. Shop around for how much it costs to trade quantity of options.
7. Don't Trade Options on Impulse - It takes discipline to trade options. Disciplined to apply a formula given the circumstances rather than trading on impulse.
8. Short Term Speculation – For anyone speculating over the short term, buying options is an excellent way to control large amounts of stock with a low commitment of capital.
9. The Options Prospectus - You can get a copy of the options prospectus, called “Characteristics and Risks of Standardized Options”, online at The Options Clearing Corporation.
10. Call Sellers – Call sellers have much less risk when they already own 100 shares of a stock. Typically the Call seller will be profitable.
