The #1 Thing You Must Get Right When Trading Options | | | It has outperformed AMD, Amazon, and Microsoft this year… | No, it's not an AI company or chipmaker. | But Costco sure is trading like one. | Yesterday I was in the TheoTrade Live Room discussing why I was bearish on the stock. | | My colleague, Blake Young, has his opinion on Costco too - but he's bullish. | You can watch our discussion here on YouTube. | Of course, differing opinions are what make markets. | But one thing traders fail to remember is that we can both be right (or wrong) and make (or lose) money on our trades even though we have a different opinion. | How is that possible? | Because we have different time frames for our trades. | You see, with Costco pressing up against its all-time highs, I'm betting that we see a near term pullback. | It has nothing to do with my opinion on the company. I actually love the place. Just ask around our team chat. | My decision is simply based on volatility, and that we see some mean reversion. | On the other hand, Blake has a longer term perspective. | He sees the economy weakening, and the consumer beginning to fatigue. | He believes demand and Costco will remain strong because consumers see it as a value proposition and a way to save. | So what's the lesson here? | When it comes to trading options, timing is everything. | If you are buying premium then you want to structure your trade with just enough time… | Some people think buying more time is better… but you are paying more. | Remember, there's no free lunch on Wall Street. | If you think a move is going to happen within two weeks, why do you need to get options that expire in three months? | You don't. | This might sound simple. | But you'd be amazed at how many traders fumble a trade by getting the idea right and the timing wrong. | Don't get sucked into the fallacy that more time is better or worse. | Make sure your option trades match your thesis. | | To your success, | Don Kaufman | P.S. Imagine leveraging AI insights to enhance your trading skills. With 90% of trades driven by algorithms, it's a game-changer. Click here to learn more. | P.P.S. Timing is everything when it comes to options trading. But my post from yesterday will help you understand what options strategy you should choose and why. If you missed it, you can read it here. |
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