Options Trading Mistake #7: Not factoring upcoming events

Options Trading Mistake #7: Not factoring upcoming events



options involve risk and are not suitable for all investors options investors may lose the entire amount of their investment in a relatively short period of time hello today we're gonna talk about common option trading mistakes that beginning option traders make failing to factor in upcoming events into your option strategy is another common mistake that beginning option traders make often times if you're looking at options I've seen a lot of people that will think wow look at all that option premium those options are really juiced in this instance you know if it looks too good to be true it probably is there's probably a prevailing news event that is causing the premiums of the option contracts to be greater than normal or in the instance are they sometimes too low do you look at that option price you say wow that's a real cheap option contract well maybe there's a merger or acquisition that could be happening and the stock price isn't gonna move because it's already pegged at the price of the sell out so how can we trade smarter well it's quite simple do some research if you're trading an underlying stock you need to know three specific things you need to know is there any earnings that are coming out are there any dividends that are gonna be paid prior to the expiration of the option contract and lastly is there any known news event already is there a merger acquisition that is going on bottom line is all of these really affect the price of an option contract and not knowing them can sometimes lead you down the wrong path when trying to make a plan well that's it for today I look forward to your questions and comments in the meantime may all the options you bought finish in the money and all the ones you saw finish out

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One thought on “Options Trading Mistake #7: Not factoring upcoming events”

  • Godel Escher Bach says:

    I knew Apple had an event coming on March 25 so I figured the hype would make the price go up. So on March 20, I spent $50 buying an Apple $195 call. Then on march 22nd in the morning, Apple's price was close to $197. I sold my option for $380. Then I figured the price would go down right after because it usually does after a fast spike, so I bought a $70 $185 put and sold it on Monday morning before the event for $150. So right now I bought a call for Disney since they have an event on April 11.

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