🚫 New Option Traders Make (and How to Avoid Them)

Options trading can feel exciting—fast moves, big wins, and lots of strategies to try. 🎢 But for many beginners, that excitement quickly turns into frustration (and losses) because of avoidable mistakes.

In this post, we’ll uncover the most common rookie errors in options trading—and give you the tools to dodge them like a pro. 🛡️

❌ Mistake 1: Buying Far Out-of-the-Money (OTM) Lottery Tickets 🎲

• The Problem: You see a super-cheap option and think, “If it moves just a little, I’ll make a fortune!”
• The Truth: Low-priced OTM options often have very low Delta (like 0.10), meaning less than a 10% chance of ending profitable.
• Better Move: Focus on options with Delta 0.25 or higher to improve your odds.

💡 Tip: Be the casino, not the gambler.

❌ Mistake 2: Ignoring Liquidity 💧

• The Problem: Trading illiquid options with wide bid-ask spreads can eat up profits.
• Example: A $1 spread = $100 loss per contract before the trade even starts.
• Better Move: Stick to high-volume, tight-spread options.

❌ Mistake 3: Not Matching Time Frame to the Trade ⏳

• The Problem: Buying weekly options for a move you think will take months.
• Better Move: Always match the expiration to your expected timeline. If your trade idea is 2 months, buy an option at least that far out.

❌ Mistake 4: Forgetting About Vega 📉

• The Problem: Holding through earnings without realizing volatility will crash afterward.
• Better Move: Understand Vega’s impact—after big events, option prices often drop even if the stock moves in your favor.

❌ Mistake 5: Risking Too Much 💸

• The Problem: Going “all-in” on one trade.
• Better Move: Never risk more than 1% of your account on a single trade. Small bets = staying in the game longer.

❌ Mistake 6: No Exit Plan 🚪

• The Problem: Holding on until expiration and hoping for a miracle.
• Better Move: Have clear rules for when to take profits or cut losses—before you place the trade.

🎯 Quick Survival Rules

✔ Trade liquid options only
✔ Use position sizing (max 1% risk per trade)
✔ Match option expiry to your trade idea
✔ Understand the Greeks before betting big
✔ Avoid emotional “revenge trades”

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