Reality check time --know how much stock you're really controlling
Always do a reality check and calculate how much stock you are really controlling when you initiate an option trade. If you buy 20 contracts, remember that you're actually controlling 2,000 shares of the underlying stock. If you would only normally take a 500-share position in a stock, then you should only buy five option contracts.
Some investors get carried away with options, and end up owning 50 or 100 contracts or more -- but don't realize that their investment can go to zero!
- What's Hot: DELL, DHI November 20, 2009
- Sidewinder: MCD, DKS, JPM November 20, 2009
- Options News: SII November 20, 2009
- Sidewinder: CY, ADSK, KG November 19, 2009
- Options for Dummies November 19, 2009
You don't have to buy the same number of contracts with every options trade you make, especially when trading the options of higher-dollar stocks.
3 Secrets of Successful Day Traders
What the pros know can help to keep regular traders from getting scammed.
This isn't our parents' stock market, thanks to the explosion of the derivatives markets during the past few decades that we can use to our advantage!
Avoid This Simple Mistake When Trading LEAPS
To keep from getting 'ticked' off when trading LEAPS, you need to know exactly what you're buying.
