OTM Options direction and speed
This post is intended to be understood by novice traders who want to trade OTM options or are currently trading. I would not be using any technical jargons.
The biggest mistake what a new option speculator does is to buy OTM (Out of the Money Options).
Why? Because the price of the OTM strike looks cheap and there is less risk of losing money in case you are wrong.
- Direction of stock
- The Speed by which it will achieve the target.Ever heard about time decay? If not, Google it. It is the fastest in the case of OTM options.
This is the essential reason trader, by and large, lose in Options trading markets. The Traders more often than not purchases choices for their apparently ideal hazard/compensate attributes (restricted hazard/boundless reward). In any case, on the off chance that he buys Options, he needs to beyond any doubt about market speed and bearing. Just on the off chance that he is spot on the two checks would he be able to hope to make a benefit? On the off chance that foreseeing the right market bearing is troublesome, effectively anticipating course and speed are presumably past most speculators’ capacities.
We will talk about more Options trading the coming days. Till at that point, Stay Tuned!