The second important rule of option trading:
If time affects our position negatively, means, minimum time should be in position! (time is working against us).
Decrease or increase can happen, Or maybe not, but time flows in one direction anyway, every day bringing us closer to expiration.
What does it mean?
Your task - be in the position of purchased options for as little time as possible. We entered at the beginning of the movement:
1. either quickly made a profit and exited the position (or rebuilt it hoping to get even more profit with less risk)
2. either made a mistake with the direction of movement and exited the position with a loss (or rebuilt it hoping to recoup the resulting loss due to a new option scheme)
Many people do the opposite.. For example, bought Call options, the market is not growing, and we all sit and wait for growth, watching the premium of our options melt away.
The main mistake of most beginners - this is a long time of holding positions, based on the purchase of Call or Put options. Remember - time is against you!
Set a time frame in advance for holding a position and follow them clearly. For example, bought option and determined the maximum number of days, during which you will be in position. As soon as the deadline has come - sell options or move from the current position to another position (where time is already working for you, or the negative impact of time is minimal).
Output
When to use naked option buying in your trading?
Only when strong trending up or down in the shortest possible time. The position is held for a minimum amount of time and at the first signs of failure (stopping the movement or reversal of the market) immediately closes or moves to another option position, which should correspond to the current market.
Main, do not try to buy options in any situation, how do most of those, who just started working in this market.
