Do you do Forex trading? If so, you have come across option trading. What is options trading? With options trading, traders get the limelight to buy or sell underlying assets at a predetermined price before their contract expires. Option trading dramatically helps to enhance a trader’s portfolio. As long as everyone has their trading habits, some are worth breaking. Most traders who do options trading make many mistakes repeatedly, even when the errors are easily avoidable. Trading is not easy as many people perceive it to be. However, to make it less complicated, you have to avoid the many mistakes. This article will discuss some of the options trading mistakes you need to avoid at all costs. Let’s jump straight to the list. 

• Not having a defined exit plan

If you are an ardent trader, you probably have heard a million times that you should have a defined exit plan. Do you have one? When doing your trading, it is essential to control your emotions. Managing your feelings does not mean controlling your inner body emotions, but your trading emotions. You have to accommodate any trading fear as it happens. It would be best to plan closing out of trades when things go wrong. Here, you have to create your upside exit and downside exit points before bad things happen. It is essential to set a time frame for each exit to avoid going into losses. Options do not last long since they are decaying assets. The more the decay accelerates, the more the expiry date approaches. When doing the long call or put and what you predicted doesn’t happen, it’s essential to close the trade and open another to avoid losing your capital. 

• Trading Illiquid options

When making a quote in the marketplace, you will receive a bid price and the asking price, which are different. A bid price is what someone is willing to pay, while the asking price is what someone is willing to sell the options. Most of the time, the bid price and the asking price do not portray the option’s value. The real value of the option might lie in the middle of the two. It is the liquidity of the option that varies the difference between the bid and the asking price. Liquidity is the number of buyers and sellers of that option. Illiquid options are those you can’t sell because they have limited trading. They may not have the sellers or the buyers. These pose a high risk to investors, and it’s crucial to shun them when conduction option trading. 

• Waiting longer to buy back short strategies

When trading in shorter strategies, it is essential to plan to buy back the strategy a bit early. 

When this trade is going on your way, please do not assume that it will last. Take the next step and purchase when the prices are comfortable with your options trading. Any trade working for you can suddenly go south, leaving you with losses. Ensure to grab the chance before it is too late. Many traders on this give different reasons why they took longer to buy back short strategies. Some might be hoping the contract will end, while others don’t want to pay the required commission. It is essential to strike the hammer when the metal is red hot. 

• Legging into spread trades

Legging in is the process where you get in with different legs at a multi-leg trade in a single session. 

For instance, if trading in a long call spread, you might do the long trade option and try short trading with the second leg. The market isn’t predictable. When you do this, you might fail to pull off from this spread, leading to unseen losses. When the short call collapses, you will get stuck with a long one to hedge your risks. If you want to trade smarter, enter spreads in a single trade. Do not take the extra market when there is no need. Doing so will significantly affect your odds of getting something from the transaction.

• Trying to make up past losses by doubling current investment

How sure are you that you will win with the current investment? If you lost the previous trading, do not make double investments since you might also lose the current one. At times, the options trading can turn the opposite of what you expected, making you get double losses. It’s crucial to close the trade, count your losses and find another opportunity to make your profits. It is essential to accept the loss rather than double investing and end up suffering more.  

As a trader, always try as much to avoid the above-listed mistakes when doing options trading. These mistakes got noted by experts, who have seen them getting repeated by traders several times. If you are not sure what you are doing, it is crucial to inquire from the experts to avoid losing your trading.