Option buying is consider a safe trading game. The reason we consider it safe because we know the maximum amount of loss in it. When you buy option you give premium to option seller so you don’t need to deposit any margin which makes option vulnerable for the traders which don’t have a large amount of capital to trade in the market. There is a limited loss and infinite profit can possible. The probability of profit while buying the option is not so high. The enemy of option buyer is theta decay. When option losses it value with time is known as theta decay.
When To Buy Options?
The first thing one should consider while buying naked option that it shouldn’t be hold for more than five to seven trading sessions. We have a mentality of losing the entire amount of premium which is not helpful for any option buyer. Every option buyer should take a stop loss while initiating a trade.
The only right time to buy the option is when there’s a momentum either in the stock or indices. The only reason one should buy option when trader knows the direction of the stock or indices. Buying option is a directional way of trading in the market. The last reason one can buy option is just to do gambling in the market.
Firstly, avoid gambling in the market if you do never sell option for gambling just buy them.
