Options trading pitfalls

What are the common pitfalls and mistakes that a novice options trader should be aware of, apart from STT?

Some points to keep in mind:

  1. When trading Stock Options, first make sure if the strike price is liquid.
  2. Never place a market order for Stock Options.
  3. When dealing with Nifty options avoid strike price ending with 50’s
  4. For Nifty options do not trade options more than 100 points away from current Nifty value.
  5. If you have not timed your entry and exit , you could be 100% correct with the direction of market but still end up loosing money.
  6. There is more to it than what is visible on the surface when trading options, you need to have a complete presence of mind when trading options.

The 90% of the elite 10% that makes money from the markets, makes it from trading options and not stocks.

1 Like

Thanks, these are very good points :slight_smile:
How to set a limit price? I mean how to know how much is good? Suppose I want to go long in one of the stock option and it closed at 20 today. at what limit price should I put a buy order for tommorow?