Trading Insights
A Brief Theory of Time
A large part of options trading is having a “perspective” on how the market will perform tomorrow, or in a week, or a month, or a year from now. For every option purchased or sold, that perspective has to be formulated regarding the market’s anticipated treatment of the company’s option(s) for which you are going […]
A large part of options trading is having a “perspective” on how the market will perform tomorrow, or in a week, or a month, or a year from now.
For every option purchased or sold, that perspective has to be formulated regarding the market’s anticipated treatment of the company’s option(s) for which you are going to trade. You may believe that your focus should be on the long-term; say six months to a year from now. Option trading definitely requires a trader to be “forward focused” due to the fact that options are tailored for a variety of time frames.
However, the further out in time you focus, the “fuzzier” the picture gets. There are a lot of unanticipated things that can happen in the market that would render your long-term trade a clunker.
For this reason, it is advisable to focus your market perspective more to the “here and now,” and not six months to a year from now. This is done because there is less opportunity for things to go surprisingly wrong.
When creating an options trading plan and building that perspective, look to the short-term over the long-term.
A large part of options trading is having a “perspective” on how the market will perform tomorrow, or in a week, or a month, or a year from now.
For every option purchased or sold, that perspective has to be formulated regarding the market’s anticipated treatment of the company’s option(s) for which you are going to trade. You may believe that your focus should be on the long-term; say six months to a year from now. Option trading definitely requires a trader to be “forward focused” due to the fact that options are tailored for a variety of time frames.
However, the further out in time you focus, the “fuzzier” the picture gets. There are a lot of unanticipated things that can happen in the market that would render your long-term trade a clunker.
For this reason, it is advisable to focus your market perspective more to the “here and now,” and not six months to a year from now. This is done because there is less opportunity for things to go surprisingly wrong.
When creating an options trading plan and building that perspective, look to the short-term over the long-term.