10 Common Options Trading Mistakes (And How to Avoid Each)

Beginners make the same ten mistakes in roughly the same order. The good news: most are recoverable, and all are documented. The bad news: each one tends to cost a few thousand dollars before the lesson sticks.

The top five: (1) Buying cheap OTM calls because the headline P&L looks attractive — most expire worthless. (2) Ignoring IV rank and selling premium when IV is low or buying when IV is high. (3) Position sizing by gut feel rather than account percentage — one bad trade can wipe out months of progress. (4) No written exit plan, leading to greed-driven holds and panic exits. (5) Trading earnings without understanding IV crush — directional thesis right, P&L still down 50%.

Mistakes six through ten: revenge trading after a loss, holding through expiration on positions you should have closed, ignoring liquidity (wide bid-ask spreads kill the math), trading too many tickers at once (no real edge in any of them), and skipping the trade journal so the same mistakes repeat for years. Each of these has a specific countermeasure in the curriculum — but recognition of the pattern is step one.

Frequently Asked Questions

Which mistake is the most expensive?

Buying cheap OTM calls and naked-short undefined-risk positions in beginner accounts. The first bleeds slowly; the second can blow up an account in a single bad day.

How do I stop revenge trading after a loss?

Hard rule: no new trades for 30 minutes after closing a loss. The cool-off interrupts the impulse loop.

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