Getting started with option investing or trading is not easy…especially with so many “education” vendors out there–promising that their services are the only thing you’ll need to be consistently profitable. The reality is—most of them are just plain awful…lacking the knowledge and experience needed to help investors strive in today’s market.

1. Why Style Drifting
Can Kill Your
Success & Bank Roll

2. Getting started with option investing or trading
is not easy…especially with so many “education”
vendors out there–promising that their services
are the only thing you’ll need to be consistently
profitable.
The reality is—most of them are just plain
awful…lacking the knowledge and experience
needed to help investors strive in today’s market.

3. However, I’m thankful for them…because they
get people engaged and involved in the market.
Eventually, they stumble across
OptionSIZZLE…which gives me an opportunity to
show them the right way to approach the
financial markets. Now, I was fortunate enough
to see the power of unusual option activity (and
following smart money trades) very early in my
career.

4. In fact, I saw it work with my own eyes when I
was a runner on the floor of the Chicago
Mercantile Exchange (CME).
To do this day, I believe it’s the best indicator for
finding potentially profitable trades—my
number one method for generating ideas.
Does this mean that it’s the only way to make
money from the markets?

5. Absolutely not.
But I know it works…and have seen it
work…more times that I can remember. But
trading ideas can come from so many different
places.
For example, some traders like to focus on the
technical landscape, looking for patterns in
charts that may provide information on where a
particular stock may be headed next.

6. Others, might ignore price charts and focus
solely on the fundamentals of the company.
Furthermore, there are traders who focus on
news, earnings and economic releases. Their skill
lies in their ability to digest the information and
make an opinion on whether or not the market
participants are gauging the new information
correctly.

7. I could keep going, but I think you get the
picture. The bottom line, there are many ways to
skin a cat.
Which method is the best?
Well, it really depends on what you’re
comfortable with. It’s going to take some trial
error to piece it all together.

8. In the beginning of your investing or trading
career, it makes sense to explore several
different methods to see which you feel works
and what you’re comfortable with.
I myself, am very active in selling option
premium and creating structured trades, which I
believe creates a higher probability of success
than buying option premium. In fact, statistics
and research backs my belief.

9. However, I still have people that tell me that they
only buy options.
In any event, learning how to make money from
the market is not a skill we’re born with…it’s
something we all have to learn.
Heck, I passed several security exams to get in
the industry as a professional…but still managed
to lose over $2k on my first ever options trade.

10. Once you’ve identified the “style” of trading that
works…you try to improving your
method…refining and tweaking your techniques
as the market evolves.
One major issue new and sometimes
experienced traders make is “style drifting.” It’s
when you put on trades that are out of your
wheelhouse or take someone else’s trade idea
without fully understanding the merits behind it.

11. For example, let’s say you generate ideas from
researching stock charts and thought a particular
stock looked bearish…however, there is breaking
news—a rumor that the company is going to be
acquired. With that said, you jump in and buy
calls in the stock.
An hour later, it turns out the rumor is
unwarranted and the stock price starts dropping
hard…the volatility in the calls get sucked out
and lose half their value.

12. In the example, the trader’s strength lies in
reading price charts—not dissecting news. They
didn’t know how reliable the source was or
whether or not the story had merits. They simply
hoped that it was true and they would catch a
quick pop in the stock price.
Not only did the trader lose money…but they
probably cursed themselves out a little bit for
not sticking to their trading plan and staying
disciplined.

13. Here’s another one…a trader focuses on longer
term option strategies, mainly trend trades that
last a month or two. They don’t like weekly
options because they feel they move to fast for
them…the rapid fluctuations often cause them
to exit at the worst times.
However, longer term option trades give them
time to see their idea evolve without panicking if
it doesn’t work right away.

14. For some reason, they feel compelled to buy
some weekly options in a stock mentioned by a
guy with ponytail on TV …hoping that this time
would be different and they’d have success with
weekly options.
It turned out that the stock options did pop on
the mention….however, not enough to get out
(when you factor in commissions)…a day later
the stock didn’t move and the time decay
crushed the value of the options.

15. Again, a situation of taking someone else’s trade
idea…and putting something on in which the
trader has struggled with in the past and doesn’t
feel comfortable.
Style drifting can happen out of
boredom…excitement…the desire to make money
even when opportunities are limited.

16. In order to fight the urges, you’ve got to focus on
your process…treat investing or trading like a
business…your job is not take make trades
everyday…
It’s to find opportunities that give you a chance
to make money….and if there are no
opportunities that day—it’s OK.

17. It’s a terrible feeling when you make money
from your A Trade…but instead of adding gains
to your portfolio…it’s making up for losses you
made from style drifting.
Without a doubt, this requires patience and
discipline…but it’s well worth it. It pays to stick
to your bread and butter trades when building
your trading account…you’ll thank yourself in the
long run.

18. How Can You Figure Out What Your A Trades Are?

19. Keep a journal and record your ideas, trades and
overall feelings on a daily, weekly or monthly
basis (depending on how active you are).
You see, by keeping notes on why you got into a
trade, the risk you took, trade specifics (option
strike, expiration, option premium spent or
received, # of contracts bought or sold, implied
volatility, historical volatility, option greeks, the
bid/ask spread, date position optioned, adjusted
and closed etc.).

20. In addition I rate my mood and energy level.
For example, I rate my overall emotions from 1-5
scale…a 1 being: Feel Great…and 5 being: Feel
Rubbish.
Eventually you’ll have enough stats on your
performance to identify what you do well…and
what you struggle with.

21. For example, let’s assume you think you trade
earnings well…however, looking back at your
journal, you find out that you actually stink at
trading earnings.
Instead of relying on your feelings or
memory…you can go back and look at the
numbers for some hard evidence.

22. It’s very similar to a sports team watching game
film after each competition. They study what
they did right…what did they did wrong…and
what they have to do to improve for their next
game.
You might see it at the health club, individuals
writing down the exercises they’re doing, the
amount of time spent…if they’re lifting weights,
the number of sets and weight being used. They
do it to track progress, improvement and make
adjustments.

23. And believe me…keeping a journal is extremely
important when you’re just starting out as an
options investor or trader. I recently read that
Lebron James gets a four-page scouting report
before every game…while his teammates get a
two-page report.
Talk about studying and preparation!

24. By the way, two great places to journal
are EVERNOTE and Google Docs.
And yes…they are both free.
Now, if you’re still in that trial and error
stage…trying to figure out what you’re A Trade
will be… check out my free report on how I use
unusual options activity to find tomorrow’s big
stock movers.

25. Have you ever caught yourself style drifting?
If so, I’d love to hear your story…it happens to
the best of us.
I’ll be hanging out in the comments section
below.

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