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Golden or 10% Rule of Option Trading

 
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arthur
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PostPosted: Tue May 31, 2005 7:35 pm    Post subject: Golden or 10% Rule of Option Trading Reply with quote

Golden Rule of Option Trading:

"If your option portfolio loses over 10% of its value within a week, then move your portfolio 100% into cash, and don't trade for a week."

This is to avoid losing most of your gains in "irrational" markets, which can wipe out months or even years of work within a few weeks. Markets seem to become unpredictable once a year.

If the rule isn't followed, then the next best alternative is to trade options with "several extra months of time value."
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