Top 10 Option Trading Tips

Option Trading Tip #10

My top 10 call and put option trading tips that I have learned, and that you MUST know before you start trading calls and puts.

---

---

Trading Options Tip #10:

Cash is King! When trading options, the trading tip that Cash is King applies in more than one instance.

---

When in doubt--get out! If you have made a trade and are starting to have second thoughts or you don't see the underlying stock move in the direction that you had anticipated, it might be a sign for you to get out and take your cash off the table. Sometimes when I see this happening to a trade, I go ahead and sell 1/2 the position and give it a bit more time. Selling half of a position has a wonderful mental effect--you are always right 1/2 the time.

So whether you take 1/2 of your position off the table or the whole position, it is a lot easier to sleep at night knowing that you have money on the sidelines for you to work with the next day.

I believe that Cash is King for 2 reasons. First, as I just mentioned, it is easier to turn off your computer when the market closes, enjoy your evening, and get a good night sleep by reducing your exposure to the overnight news and markets.

Secondly, the Cash is King saying supports the my other tips of Ride Your Winners and Cut Your Losses. By Cutting Your Losses you are selling out of unprofitable positions and you are protecting your cash. By Riding Your Winners you are playing with the House's money (ie, your profits) which is not your cash, per se.