There’s more than one way to trade an option. But in my experience, the best way is to follow these 10 simple rules, all at once. I’ll explain these steps in my video.
These are the rules that I’ve used year-in and year-out.
- Buy only underpriced options
- Buy cheap options under $1
- Buy close-to-the-money options
- Buy options with as much time as possible before expiration
- Buy options where the underlying stock has opportunity for increased volatility
- Put the same amount of money in each position
- Diversify over time (two years)
- Buy in quantity to save commissions
- Buy a stock option that has a good chance to move across the strike price
- Try to buy options with a 20% chance of success or more
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.