LIST OF SOME OF THE MISTAKES WHICH ARE DONE BY THE OPTION BUYERS.THEY ARE :
1. BUYING DEEP OTM OPTIONS NEAR EXPIRY: SUCH OPTIONS HAVE LOW AND DECREASING DELTA WHICH DO NOT TEND TO APPRECIATE PREMIUM IN SPITE OF THE SPOT MOVEMENT. ALSO INCREASING THETA TENDS TO ERODE THE PREMIUM.
2. USING LONG STRANGLE EVERY MONTH : NOT EVERY MONTH FAVOURS A LONG STRANGLE.U NEED TO IDENTIFY TRENDING AND TRADING MKTS. AVOIDING DOING LONG STRANGLE IN TRADING MKTS.
3. HOLDING LOSS MAKING OPTIONS FOR MORE THAN REQUIRED TIME : HAVE A PROPER EXIT POINT. IN CASE UR TRADE IS WRONG IMMEDIATELY EXIT AND WAIT TO ENTER AGAIN IN PROPER TREND.
4. MAKING EARLY ENTRIES ON HOPE : THIS IS ONE OF THE MAJOR MISTAKES MADE . OPTIONS ARE MOSTLY BOUGHT ON HOPE. I DON’T KNOW WHY PEOPLE JUDGE NIFTY RATHER THAN JUDGING ITS TREND AND TRADING ACCORDINGLY.
5. BUYING CALLS AT RESISTANCE AND PUTS AT SUPPORT .
6. BULL TRAP : MANY TRADERS BUY CALL OPTIONS WHEN RESISTANCE IS BROKEN. HERE RRR IS NOT FAVOURABLE BUT STILL THEY TRADE. IT WORKS IN TRENDING MKT FOR SOME PROFIT. BUT IN SIDEWAYS MKT , PRICE COMES DOWN IMMEDIATELY TRAPPING CALL BUYERS.
7. BEAR TRAP: SAME AS BULL TRAP. HERE PUT BUYERS ARE STUCKED AT FALSE SUPPORT BREAK.
8. NOT COMBINING INTRADAY TREND WITH MAJOR TREND IN TRENDING MKTS.
9. TAKING WRONG INTRADAY TRADES .
10. TRADING IN SIDEWAYS MKT WITHOUT WAITING FOR PROPER BREAKOUTS.
11. COMPULSIVE TRADING: OPTIONS ARE NOT EVERYDAY TRADING ASSETS. THERE ARE CERTAIN TIMES WHEN U JUST NEED TO STAY OUT OF THE MARKET.
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