The Option Alpha Podcast 10: Are You Checking These 7 Things Before Each Trade You Enter?
Nov 28, 2014
Learn the top 7 things to check before making a trade, including portfolio fit, liquidity, IV percentile, strategy, strikes and timeline, and position size. Discover the importance of managing position size, having a plan B, and thinking strategically in trading. Explore options trading strategies based on current market conditions, such as the profitable GLD straddle trade.
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Transcript
Episode notes
Portfolio Fit
- Check portfolio fit before entering a trade.
- Ensure the trade aligns with your overall portfolio strategy and risk tolerance.
Liquidity Check
- Prioritize liquid markets with sufficient trading volume in both the underlying asset and options.
- Aim for at least 100,000 shares traded daily for the underlying and avoid options with open interest below 500 contracts.
IV Percentile
- Consider implied volatility (IV) percentile when selecting trades.
- A higher IV percentile suggests options are relatively expensive, favoring selling strategies.