Want to be successful trading options over the long term? Don’t let complacency get in the way, states Bob Lang of ExplosiveOptions.net.
Complacency is a common trait among humans. We work hard to get to a comfortable place, only to be lulled into the belief that everything is just fine and nothing will change (or at least, nothing will get worse). As a result, we don’t notice what’s happening around us. This can lead to a rough outcome that’s difficult to recover from.
In trading and investing, it can be so easy to fall into a complacent mindset. Our goal is to make money, so when we’re on the right side of the market, we tend to sit back and relax a bit. Markets historically rise up over the long run, but shocking moves down happen all the time. These short-term bouts of volatility can take us by surprise. And if we’re not paying attention, our portfolio will suffer the consequences.
In two words: Be proactive!
To counter the always-lurking threat of volatility, reduce your exposure. Book profits when you have them. Raising cash is always a smart move. It might keep you on the sidelines (or at least not fully engaged in the game), but it’s better to wait for the next opportunity than hope your trade will continue to increase in value.
I’ve preached endlessly about adding protection to your portfolio. Index put options are an ideal and inexpensive way to counter complacency and reduce volatility in a portfolio. I buy puts often, and it has made a tremendous difference in my performance. Plus, when volatility rears its head, I don’t panic. You can’t put a price on peace of mind.
When you fall into a lull, or maybe feel bored, remind yourself that anything can happen. Sell trades that are profitable and make sure you have those index puts working for you.
Your portfolio is your future. Protect it.
Learn more about Bob Lang at ExplosiveOptions.net.
