Best Time to Buy Stock Options
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Jade Wayans
May 1, 2010, 1:58:47 PM5/1/10
to Homeschool Flat Traveler
Stock options can be very profitable in the stock market provided you
use them right. Whenever you are buying an option you should take some
time to consider why you are buying it. Here are some tips to figuring
out when the best time to buy an option is.
1. When the Stock is giving you a Technical Signal
Going down to the basics, you need a reason for buying the option to
begin with. If you are just buying the option and hoping the stock
will suddenly have a huge move in your direction you'll be
disappointed when it doesn't.
In addition to that you also want to have some consistency in your
trading approach. If you are buying options on breakouts stick with
that and learn it well before you move onto another form of trading.
2. When you have a good risk to reward ratio
You don't want to be risking 100% of your option contract to make a
20% return. When trading options you really need to look at risk to
reward ratio. Most professional traders use a risk to reward ratio of
2 to 1 which means you have a possible reward of $2 for every $1 you
risk.
3. When you are trading with the trend
This one factor increases your odds of being correct so much so don't
ignore it. Trends can persist for a while so trading with them and not
against them is a smart thing to do.
4. When it will not kill you
You only want to buy an option when you can afford to lose the money.
If you are not going to be able to pay the rent money if you lose it,
don't put it into option trading. All money you put into a trade
should not be a large amount of your trading account to begin with.
A College Dropout Discovered a Secret That Can Turn $1,000 into $1
Million: http://pennystcjf.key.to/
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use them right. Whenever you are buying an option you should take some
time to consider why you are buying it. Here are some tips to figuring
out when the best time to buy an option is.
1. When the Stock is giving you a Technical Signal
Going down to the basics, you need a reason for buying the option to
begin with. If you are just buying the option and hoping the stock
will suddenly have a huge move in your direction you'll be
disappointed when it doesn't.
In addition to that you also want to have some consistency in your
trading approach. If you are buying options on breakouts stick with
that and learn it well before you move onto another form of trading.
2. When you have a good risk to reward ratio
You don't want to be risking 100% of your option contract to make a
20% return. When trading options you really need to look at risk to
reward ratio. Most professional traders use a risk to reward ratio of
2 to 1 which means you have a possible reward of $2 for every $1 you
risk.
3. When you are trading with the trend
This one factor increases your odds of being correct so much so don't
ignore it. Trends can persist for a while so trading with them and not
against them is a smart thing to do.
4. When it will not kill you
You only want to buy an option when you can afford to lose the money.
If you are not going to be able to pay the rent money if you lose it,
don't put it into option trading. All money you put into a trade
should not be a large amount of your trading account to begin with.
A College Dropout Discovered a Secret That Can Turn $1,000 into $1
Million: http://pennystcjf.key.to/
--
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