What I Wish I Knew Before Trading Options

Options trading can be super exciting but, it takes some finesse to get it right.

Here are the five things I wish I knew before I started options trading so you can learn from what I did wrong. 

I wish I would have practiced placing my first option trade instead of just jumping in and not fully understanding what I was doing 

There are so many mechanics in trading options. I should have done my research on how to do it instead of just doing it. Anyone can just go into their brokerage account and trade, but knowing the how-to might make you more successful. 

I wish I would have realized how important it is to read the stock charts.

Trading options, or an option in general, is a derivative of the stock itself. You need to have a pulse of what the stock is doing and where you think it could go. Once you've mapped out the possibilities, you should feel confident purchasing the option. 

If you didn't prepare by reading the stock chart, and it goes in the wrong direction - you will supercharge your losses. 

I wish I would have learned about protecting my downside.

Like many other people that enter in the market, I learned about stocks and options. I thought stock only went up, and also thought options were only going to go up.

But the option can go down if the stock goes down. If this happens and you have a call option, you can start to lose money immediately. 

How can you protect your downside? You can use put options, covered calls, or spreads to reduce your risk. 

I wish I would have come into the game with the mindset if I have 50% or higher profit, that's good enough. Let's take that money and run. 

Sometimes you're in the profit with an option. Unlike a stock, you can't hold an option forever. When the expiration date hits...

There have been a few times where I'm at 90% of profit with one to two days until expiration, and I wanted that last 10% profit. I wanted that stock to expire with 100% of profit in my pocket. 

But I can tell you many times on that last one or two days, the stock did the complete opposite. I gave back all of my gains. Sometimes I even lost money. 

I had to stop myself and ask why I was risking the 90% profit I had, just for the 10% that was left. 

I wish I would have started with staying focused on the chart, and not how much time I have left in the option. 

So often new traders, and experienced traders, make this mistake. They buy an option, it shoots up to its resistance point (so it might not go any higher) and they think, "oh I still have time, how much higher can it go?" 

Then the stock doesn't go higher and it turns around, spending the next month falling down. It spends the following month doing nothing but going sideways. 

I thought I had all this time and started to lose money because the stock didn't turn around. 

What are some things you wish you knew before you started trading options?

If you're new to trading options, or trading in general, what are some questions you have about getting started?

We want to help you avoid my mistakes and learn what you need here, at Power Trades University.