Become a Member of the Online Trading Brokers World

Intermediate guide

Options Risk Management

A key issue for BO traders is options risk management, as if the rewards are high, the options risks should follow suit. Every trade you place has two possible outcomes – you gain a profit on your investment up to 90%, or loose the whole amount you traded, with a possible refund up to 15%. Of course, in the financial markets every action involves some level of guesswork and options trading risks, so that is why it is essential to follow some principal rules to trade successful over a long period of time and not to go bust There are several useful methods to minimize your exposure to options trading risks and to keep the profits flow steady.

Avoid Options Risks

First of all, you should essentially find and stick to the strategy you find suitable. Any deviations as a rule cause only harm and do not benefit you in the long run. Just to be sure you can test your thoughts on a options demo account without sustaining any losses.

One of the top priority issues many traders face is overestimating trading potential. The rule of this kind of options risk management is not to place too many trades in a single session or erratically try to recoup losses. These things are the primary demons you, as a trader, should overcome – indiscretion and greed. Making successive bad trades can exhaust your account, so trade no more than 5% of your funds at any given time.

Options Trading

Reward issue in options risk management is also a battlefield for many traders. The riskier the trade is, the higher the returns are. So if you choose to place a trade with return higher than 70%, you should be pretty sure that the trade is going to work out. This is done through extensive research and analysis, and not through simple intuition. The best choice is to diversify you options trading portfolio, for instance, by trading Gold and Silver as well. And if the US Dollar rises, there is an underlying likelihood that the mentioned assets will fall, so such correlation is of essence.

Finally, when you start running you do not run a marathon on the first day of training. So why should you make wild guesses and trade many assets all day long? This will cause permanent harm to your bankroll, because your options trading steps should be tiny and grow steadily together with your profits. So stay focused, make a few traders per day, learn and grow. This will allow you to leverage options trading risks and to become a professional trader.

You make take your time thinking it over, but you would be amazed how many traders place 20% or more of their funds into a single trade. These trades are as a rule made on emotions and rarely profit the investor. We all hope to make money fast, but the truth is that all of us make bad calls from time to time, as we are human. So don't overestimate your trading prowess and stick to the safe and sound way of options trading. This is what separates successful traders from losers. Control is in your hands.

Please find out in the table below what Educational Tools each broker can offer you for Intermediate Level