{"id":10011,"date":"2011-02-17T11:59:42","date_gmt":"2011-02-17T16:59:42","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=10011"},"modified":"2021-05-06T15:17:32","modified_gmt":"2021-05-06T19:17:32","slug":"beware-of-the-fad-five-reasons-to-take-it-easy-with-a-new-options-strategy","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/beware-of-the-fad-five-reasons-to-take-it-easy-with-a-new-options-strategy","title":{"rendered":"Beware of the Fad: Five Reasons to Take it Easy with a New Options Strategy"},"content":{"rendered":"

In the options universe, there are plenty of traders who are happy to share a new strategy that has either worked well for them in the recent past, or has backtested splendidly over an extended period of time. Regardless of whether these strategies have been developed by competent veteran traders or newer traders who have not experienced every type of market condition, I\u2019d strongly suggest that you take things very slowly when adopting a new options strategy, no matter how successful it has been for the trader who has presented it. Why? Here are five good reasons:<\/p>\n

    \n
  1. Every trader is a little bit different<\/span>. Some have a high risk tolerance while others are highly risk averse. Many strategies only work if you have a high tolerance for risk . Adopting a successful strategy that does not fit your risk tolerance personality is a failure formula.<\/li>\n
  2. The trader may be on a lucky streak<\/span>. Some strategies actually have no merit. It\u2019s just that the trader has adopted an \u00a0approach which has just luckily worked out several months in a row. These strategies have a short shelf life, and you\u2019ll find that \u00a0if you check with the trader several months later, that he or she has abandoned the strategy completely.<\/li>\n
  3. The trade was only suitable to a certain market condition.<\/span> A lot of times a trade is legitimate when certain market conditions exist and will fail in other conditions. For example, some strategies tend to do much better when market volatilities are high, but fail when they are not. It\u2019s possible the trade has been successful because it was traded \u00a0primarily during high volatility periods and is destined to fail when volatilities return to normal.<\/li>\n<\/ol>\n
      \n
    1. The trader may never have traded the strategy with real money!<\/span> I\u2019ve seen traders enthusiastically presenting concepts that have never actually been traded with live capital. They are purely theoretical concepts \u00a0that have been backtested and paper-traded at most. Neither you nor the trader himself have any idea how the trade would really play out under live conditions, with real money at stake and real execution issues that backtesting and \u00a0paper trading will not make apparent.<\/li>\n
    2. There are nuances that no set of \u201crules\u201d can capture.<\/span>\u00a0Most solid strategies have a set of rules or guidelines that are followed by the trader who has developed the approach. However, no<\/em> set of rules can capture every issue that can come up in the course of a trade. A trader experienced with a particular strategy may make battlefield calls that would not be reflected in a set of guidelines and can definitely make the difference between a profitable trade and \u00a0and unprofitable one in any given month.<\/li>\n<\/ol>\n

      Having said all of that, it\u2019s healthy to adopt new strategies, adding \u00a0arrows to your quiver of options trades. Next time we\u2019ll talk about a common sense approach to incorporating new ideas into your mix of options strategies that you actively trade.<\/p>\n

       <\/p>\n

       <\/p>\n","protected":false},"excerpt":{"rendered":"

      In the options universe, there are plenty of traders who are happy to share a new strategy that has either worked well for them in the recent past, or has backtested splendidly over an extended period of time. Regardless of whether these strategies have been developed by competent veteran traders or newer traders who have not experienced every type of … Read More<\/a><\/p>\n","protected":false},"author":741,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,1402,1584],"tags":[1599,1598],"class_list":["post-10011","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-options-education","category-seth-freudbergs-blogs","tag-income-options-trading","tag-options-strategies","no-post-thumbnail"],"yoast_head":"\nBeware of the Fad: Five Reasons to Take it Easy with a New Options Strategy | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/beware-of-the-fad-five-reasons-to-take-it-easy-with-a-new-options-strategy\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Beware of the Fad: Five Reasons to Take it Easy with a New Options Strategy | SMB Training\" \/>\n<meta property=\"og:description\" content=\"In the options universe, there are plenty of traders who are happy to share a new strategy that has either worked well for them in the recent past, or has backtested splendidly over an extended period of time. 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