Today I'd like everyone to welcome Andrew Hart from ETFTradr.com. I asked Andrew to tackle ETF option's as these markets have been growing in popularity and complexity! Please enjoy the article, comment below with questions for Andrew, and visit ETFTradr.com.
Here's one for you new and intermediate options traders (though frankly, I think traders of all experience levels can benefit by getting back to basics). Want to know what I think are the four cornerstones of sound options investing? They aren't complicated, yet they seem to be elusive too much of the time. They are…
1. Invest in options that respond well to the underlying stock's movement (high delta)
2. Minimize time decay (the natural erosion of an option's value over time)
3. Buy enough time to capitalize on major moves (you don't have to hold it the whole time)
4. Minimize volatility (since volatility can shake up your confidence and your account balance)