Options Trading Business

You will need to treat this endeavor as a business, indeed your own options trading business. So far we’ve covered the appeal and the mechanics of options selling. But in order to make it a business we need to cover two more items: Developing a Plan , and The Psychology of Success.

Let’s talk about the Psychology of Success. Because options selling involves risk and money, you mind can become clouded by competing thoughts and concerns when you place options trades. You may find yourself fearful or anxious, checking your positions incessantly and worrying about what might happen. Alternatively, you may be the type who sells a few puts then forgets about it, assuming your job is done.

The truth is, you must develop and follow a plan, and develop good habits and attitudes consistent with success. You must adhere to your plan and the contingencies you set out in your plan should market conditions tell you to take defensive action. You must learn not to change your plan after you place your options trade. Remember, your goal is to convert the premium you receive to income, preferably as the option expires worthless.

The Psychology of Trading has been covered by numerous authors. Probably the best reference I can provide is the work of Dr. Brett Steenbarger. He is the author of several books on trading psychology. His website is chock full of useful information about the mental aspect of trading. His site also contains what is probably the largest source of free articles about trading psychology.