Options trading offers incredible potential, but its leverage is a double-edged sword. For many, it becomes a fast way to "donate money to Wall Street" by falling into a few common traps. This episode is a deep dive into the unforced errors that derail most traders and answers the question:

What are some common mistakes to avoid when trading options?

We provide a complete guide to the eight most critical mistakes that can drain your account and your confidence. Discover why the "mother of all mistakes" is trading without a written plan, and learn how ignoring implied volatility (IV) can lead to losing money even when you're right on a stock's direction. We'll cover the dangers of improper position sizing, "revenge trading," and why using a market order for options is like telling a car salesman, "I'll pay whatever."

Success in options isn't just about what you do; it's about what you don't do. Which one of these mistakes resonates most with you? Subscribe to learn how to sidestep the common traps and trade smarter.

Key Takeaways

• The "Mother of All Mistakes": Trading Without a Plan: The most fundamental error is trading without a clear, written plan. Every trade must have a predefined maximum risk, a profit target, and a clear reason for entry. Without one, you are simply gambling.
• Ignoring Implied Volatility (IV) is a Cardinal Sin: IV is the "price tag" on an option. Buying options when IV is very high (like before an earnings report) is extremely risky due to "IV crush," which can cause the option's value to plummet even if the stock moves in your favor.
• Position Sizing is Your Best Friend: One oversized bad trade can wipe you out. The key to survival is risking only a small, fixed percentage of your capital (e.g., 2-5%) on any single trade. This ensures that no single loss can cripple your account.
• Always Use Limit Orders, Not Market Orders: Using a market order for options is like shouting, "I'll pay whatever!" It exposes you to wide bid-ask spreads and bad fills. A limit order gives you control over your execution price and protects you from overpaying.
• Never "Revenge Trade": After a painful loss, the emotional impulse to jump right back in and "get your money back" is one of the most destructive behaviors. The correct response is to step away, calm down, and review the loss objectively before placing your next trade.

"Options trading can be the most powerful wealth building tool, but if you ignore these basics, it can also be the fastest way to donate money to Wall Street."

Timestamped Summary

• (01:19) Mistake #1: Trading Without a Plan: Discover why failing to have a written plan with defined risk and profit targets is considered the "mother of all mistakes."
• (02:44) Mistake #2: Ignoring Implied Volatility (IV): Learn how IV acts as the "price tag" on an option and why buying into high IV can lead to "IV crush," where you lose money even if you're right on direction.
• (06:54) Mistake #5: Holding Losers Too Close to Expiration: A look at why clinging to a losing, out-of-the-money option near expiration is like "hoping a lottery ticket becomes a Tesla" due to accelerating time decay (theta).
• (08:26) Mistake #6: Trading Earnings Without a Specific Strategy: Hear a powerful cautionary tale about a Netflix trade to understand why simply buying a call or put into an earnings announcement is a losing game for most traders.
• (11:13) Mistake #8: Revenge Trading: A breakdown of the most dangerous emotional mistake a trader can make and why the only correct response after a frustrating loss is to step away from the screen.

Which of these eight mistakes have you been guilty of? Share your e

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