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9 Weeks to Better Options Trading: 5 Rookie Mistakes to Avoid Like the Plague

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Veteran options trader Steve Smith identifies five pitfalls that options traders need to know about -- and avoid at all costs.

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5. Failing to Diversify

Ideally, no single position should represent more than 5% of a portfolio. My OptionSmith portfolio typically carries six to 10 positions at a time. These can run from complex, multi-strike hedged positions that have four to six months until expiration, to speculative plays based on unusual activity or an upcoming event that will be held for just a few days.

Why? Because again, I never want to get knocked out of the game on one trade, or allow a position to get so large that it could threaten gains elsewhere in the portfolio if things go south.

When people go broke trading options, it's usually because they not only swung for the fences on an earnings play, but put far too much money into that single trade. Try OptionSmith today.
No positions in stocks mentioned.

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