Several strategies exist that reduce risk while increasing return. Traders can learn how to benefit from the flexibility and power that stock options can offer with a little effort. The following options strategies are fundamental knowledge for all investors.
1. Options are inherently riskier than stocks.
2. If you are successful trading stocks, consider trading options.
3. Immediately after placing an order, place a stop loss.
4. Practice using the right RRR (Risk To Reward Ratio).
5. The psychology in options is significant. So put some effort into psychology so you can avoid overtrading and minimize losses!
6. Always expose 1 to 5 percent of your total investment to risk!
7. Avoid trading too much. No matter, you're out of luck. Refrain from taking the opposite side. Still, yes! Those who are sellers can hedge their positions. Do not, however, take a counterposition as a buyer!