Many options traders spend the first 5 years of their options trading lives in the search for the ONE STRATEGY TO RULE THEM ALL. That one magic holy grail of an options strategy that will win no matter what and magically produce money with little to no effort and experience nor competence. However, after spending a lot of money learning various different options strategies, most options traders fail to experience that consistent effortless money making promised in options trading. There are many reasons for this, chief of all is that a good options strategy should be comprehensive and well crafted and well proven in the market. However, even with a well crafted and well proven options strategy, many options traders STILL fail to experience any success. Why is that so?
The mistake most options traders make is in believing that success in options trading lie solely in the options strategies. As such, they believe that if they learn that one winning strategy from that one winning options trader that they know, they are going to be just like that winning options trader. However, that is often not the case. The reason is that more than the start and end of an options strategy, the process in between is what determines the outcome more than the outcome that the options strategy is designed to produce! This means that if an options strategy is designed to produce a certain amount of profit within a certain amount of time under a certain condition, you can still lose money if the process between putting on the position to when you close out of it is not managed properly! The process literally determines the outcome of an options strategy more than just how an options strategy is designed and what it is potentially capable of doing!
If the outcome is heavily determined by the process from start to end, what determines the quality of the process? The options trader! The
risk appetite, the emotional capacity, the level of experience in options trading, the level of experience with that specific strategy, right down
to how that options trader conducts his or her daily life and the trading environment all plays a part in determining how well an options trader
is capable of managing the process and life cycle of an options strategy.
This is why there is actually such a thing as a "good options trader" and a "bad options trader". If anyone can completely reproduce the results of another simply by using the same options strategy, there would be no such thing as good or bad options trader. A good options trader, someone with the experience needed to know how to respond to every surprise situations during the life cycle of an options trade, the self knowledge to know how to conduct oneself in order to minimize emotional mistakes and the knowledge to know how involved one should be and should not be for the specific options strategy etc all plays a part in how well an options trader can manage an options position. Understand that experience does play a huge part in the success in options trading.
One of the things most options traders sorely overlook in an options strategy is that an options strategy requires MUCH MORE than just the composition of options contracts in order to become a true STRATEGY. A composition of options contracts in order to produce a certain potential profit outcome does not make it an "options strategy"! It is merely an "options concept" at that point! It is merely a concept or a core engine which could produce that outcome, IF, you know which stock to choose, how to determine the correct market condition for that kind of a concept, what conditions make the best entries, all the plans for everything that can go wrong in the middle and all of the possible scenarios in which you should exit the position and HOW! All of these put together makes an OPTIONS STRATEGY or a Trading Plan. Without a comprehensive strategy, you would fumble at the countless different things that can happen between the time you put on the options position to when it is time to close it out and therefore misconduct the process, leading to bad outcomes.
As you can see above, winning in options trading goes far beyond the common knowledge of just following an options strategy or even what an options strategy really means. In the end, what matters most is the process between the start and the end of an option trade. What you do, how you do it and if there are any guidelines to follow, all makes or breaks the outcome of an options trade more than just the options strategy itself. With this awareness, approach your next options trade asking the questions above before you really commit to it. Do you have a good process, are you a good enough options trader for that kind of process?
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