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.

🏆 TRADE EXECUTION 🏆

You do NOT have to know what's going to happen next in order to make money. We MUST identify our edge, and act on the edge with proper sizing and risk management.

In this thread I will go through multiple different trade situations and how to process them.

First and foremost, my RULES (tailor to your liking):

- No more than 10% of account in a trade (usually 5-7%)
- No more than 1 full position at a time
- No averaging down
- HARD stop loss @ -10% (you can always re-add the position)
- I do not hold overnight (100% cash)

Scaling in profit situations:
(I like to sell in 1/3's most of the time)

1. 15-20% scale 1/3

2. Scale next 1/3 into momentum on next leg (35-40%) or if it starts to reverse I will sell remaining position +10% or have breakeven stop

3. Next leg scale into momo. or stop out +20%

Stopping out:

KEEP LOSSES SMALL. If your max loss is -10% and average gain is 20%, then you can lose more trades than you win and STILL be profitable.

You must think of each trade as "playing an edge." The trade either works or it doesn't. Accept it.

My goal is to get an entry as close as possible to my trigger. That way if it goes against me, my loss is minimal. I am not looking for any sort of confirmation to take losses.

Suppose I enter just past my call trigger, but the very next minute, it drops back below. I'm OUT.

**Options Strategies Broaden Your Range of Trades**

1/n

Going Long Calls/Puts are the plays most retail traders use (equity trader strategies, higher leverage/lower margin)

The beauty of options is there are many more ways to profit, beyond pure directional bias.

#MomoTwit

2/n *Quick Review of Options*

Options are a derivative contract which allows the holder to buy/sell the underlying at a determined price by a certain expiration date.

Options Greeks (delta, gamma, vega, theta) affect contract P/L based on changes in volatility, time, & price.

3/n -Covered Calls-

If you have 100 shares of XYZ stock, you could short a call contract, w/ your shares as collateral. Strategy allows you to collect premium.

Either your call expires worthless or it closes ITM. If ITM you sell the shares at the strike price of ur short call

4/n Generally, you employ a covered call strategy when you have a near/short term neutral/bearish view on your position. Thus this allows you to collect money/premium or hedge when the stock is not rallying.

5/n -Straddle-

This is where the trader buys a call & put at the same strike price and expiration date. You would do this when u expect a large move outside the expected range in *either* direction

You will lose on this trade if the stock does not move/stays within a range.

9 Websites for FNO Traders ( * = I use)

https://t.co/sYysUKJ8UF *
https://t.co/3jpbgaUo0u *
https://t.co/rAZy6F3z2f
https://t.co/tkfoVWmDXe
https://t.co/tjkVFMLud0
https://t.co/tqqja3KIx9
https://t.co/lmrx7gClQd
https://t.co/HZtIaZubOb
https://t.co/wWgtdIqNsI *

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