We are continuing to share some of the most common and costly trading mistakes.


Keith Harwood sent over a great one that is critical to remeber when things heat up.


Scroll down to read this valuable tip.

(more below)
From Keith Harwood of OptionHotline…

It’s often been said that it’s “better to be late than never”.  But that belief certainly doesn’t apply in options.  When betting on a directional move, it’s often best to remember that it’s actually better to be never than late!  After all, when buying an option, there is a very finite amount of time for the trader to be right, and if it doesn’t happen, that trade can be catastrophic.  On top of that, we should remember that if 50% of the move is already completed, then being “late” means I have only half of the upside (if not less due to other nuances of options).


I’ve spoken at length with many of my clients on the biggest mistakes that one can make in trading options.  For someone looking to trade a leveraged move, it’s important to identify it early, get in just at the right time, and then, of course, exit.  That’s what makes options so difficult.  One needs to time entry and exit well – not just one or the other.  The biggest mistakes can honestly be broken down to the simplest elements: poor timing on the entry, poor timing on the exit, and poor overall risk management.


Let’s focus today on timing on the entry, and think about what we just saw a little over a month ago.  GameStop (GME) went absolutely insane.  But I thought I missed it.  My timing didn’t seem right, even though it turns out, in hindsight, that my timing could have been absolutely magnificent.  So, given the odds, I did exactly what I should have when I saw the stock trading $40.  I did nothing.  I chose to be never rather than to be late.


And then GameStop went to an ultimate high of $483.


While that was an outlier move that was incredibly difficult to predict using traditional analytics, there are other trades out there for me to capture.  There are many times a year that stocks move 20%, 50%, or even 200%.  Those stocks like GameStop that went from $18 to $483 in a matter of 3 weeks?  Well, they simply don’t happen that often.  And I won’t bet on them happening, either.  The odds are simply not in my favor to capture that kind of move, even with the leverage of options.


For me, trading is about finding patterns, and in particular finding predictable patterns.  We can certainly trade off of outlier events, and we can certainly buy lottery tickets due to the potential magnitude of the returns even if the odds aren’t in our favor.  But the key to note on lottery tickets, swing trades, investments, or any other element of our portfolios is that if time is not on our side (as is the case in options, which decay), then sometimes it’s better to let that leveraged trade that we missed go.  There will be many more opportunities in the minutes, hours, days, weeks, months, years, and decades to come.


While missing a move like GameStop hurts, it hurts a lot more to buy in at $400+ thinking that it was better to be late than never.


Make sure you all take a chance to review how I apply technical signals to my options trades at https://optionhotline.com, and if you have any questions, never hesitate to e-mail me.


Keith Harwood

[email protected]

Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional inform
ation on auto-trading, you may visit the SEC’s website: All About Auto-Trading, https://www.sec.gov/reportspubs/investor-publications/investorpubsautotradinghtm.html

TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.

1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the “Services”) is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing (“TradeWins”) a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.

2. TradeWins’ Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.

3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services (“Subscriber”) should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.

4. You should trade or invest only “risk capital” money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.

5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.

6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.

7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.

8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber’s own election and for the Subscriber’s own risk.