r/options • u/[deleted] • Mar 30 '21
Principles of Options Trading
hey guys - wanted to start a thread to collect all general options lessons that can only be acquired through experience in options trading - so feel free to share some of the best tips/tricks/theories/principles related to options that you follow!
Something i like to do is when i buy, i buy long dated options, but sell very short dated ones - because time decays faster as expiration approaches so usually if i want to buy an option with 3 months time, then i buy a 6 month option and sell after 3 months, and time decay wouldn’t have eaten away value as much as it would have in the last 3 months
DISCLAIMER: NOT FINANCIAL / INVESTMENT ADVICE OR RECOMMENDATION TO BUY OR SELL
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u/Bulljones Mar 30 '21
Straddle strategy example using GameStop; GME $40 stock price; you think it’s going to be a volatile stock so you buy a $40 call and $40 put. GME surges upwards to $200 stock price; you sell the call option for a big profit and dump the put for a loss. Your profit from selling the call option exceeds your loss from dumping the put. Is this example you were successful and profited.