All right — so in this series I began with Forex, then moved to Futures, then talked about Stocks. Now I’m going to wrap up with some important tweaks to keep in mind if you’re trading options.
And the first thing I’ll say is this: not all options are alike.
1. Know the Type of Options You’re Trading
Many folks in our trading tribe trade SPY options — meaning they’re trading contracts based on the movement of the S&P 500 SPDR ETF.
This is a great vehicle for day trading and scalping. It can even be used for longer-term trading too.
But here’s the thing: if you’re trading options on an index or on any variant of an index, you want to make sure you keep an eye on the directly related markets.
For example — if you’re trading SPY ETF options, it really helps to be familiar with the S&P 500 cash index movement itself. And it also helps to keep an eye on the E-mini S&P 500 futures or even the Micro ES futures.
You don’t have to check them every single time you click into a trade. I’m not saying that. But I do recommend at least looking once a week.
In fact, I do the inverse of this. I trade ES futures, but on weekends I’ll review the SPY ETF chart. Why? Because it gives me a broader sense of the long-term trend.
So that’s one category of options — index or ETF-based.
The other big category — and probably the most popular among our Trading Tribe— are individual stock options.
Now, most simply, you can buy options. That means you’re buying the right to purchase shares (that’s a call) or the right to sell shares (that’s a put).
The price at which this happens, how much time you have until expiration, all of that falls into the more detailed side of options education. But at the most basic level, that’s what you’re doing.
Bottom line: know the bigger market picture your options are tied to — whether that’s an index or an individual stock.
2. Respect the Time Decay
Here’s the really important thing with options: you have time working against you.
The value of your option is generally decaying as time moves closer to the expiration date.
So when you’re building a trading plan that includes options strategies, you absolutely must account for time.
There are all different types of expiration lengths you can trade. Weekly options. Monthly options. Longer-dated ones. That’s up to you to study and decide.
But whatever you choose, your trade management sections of the plan — in my First 40 method that’s Section 3B (long trade management) or 3D (short trade management) — must address the time aspect of your options.
This is especially true if you’re doing anything longer than day trading. Swing trades in options live and die by time management.
So don’t just set your entry and exit and call it a day. Spell out how time will factor into your decisions.
Remember: with options, price is only half the story. Time is the other half.
3. Match Your Strategy to Market Conditions
The next thing I’ll say about options is this: you’re not exactly just going “long” and “short.” You’re taking a bullish or bearish stance on the market.
That’s the simplest approach.
But options go beyond that. There are strategies that let you take advantage of sideways markets. There are strategies that prepare you for an explosive move, even if you don’t know which way it’s going to break.
Now, some traders out there do really well with these advanced approaches. It’s not my personal strength — I’m more directional. But I want you to be aware of them, because they exist and they can be powerful tools.
So if you’re interested in options — either starting fresh or exploring them more deeply — pay attention to which strategies fit which type of market.
Do they work best in up or down trends? Or do they work in range-bound, sideways conditions?
That’s key, because your trading plan is not the same as a single strategy. The plan holds the strategies. The strategies are the methods you use inside the plan to decide whether or not to take a position.
When I build trading plans 1on1 for traders, I interview them and pull out two or three strategies they can keep in their plan. This way, they have tools for different conditions — a bullish setup, a bearish setup, maybe a neutral setup.
And you can do the same for yourself if you’re building your plan using my First 40 method.
Takeaway: don’t just pick an options strategy you like. Make sure it fits the kind of market you’ll actually trade.
One last thing. Remember that unlike futures, options give you the right but not the obligation to buy or sell shares. Calls give you the right to buy, puts give you the right to sell.
That flexibility is unique to the options market. And it’s part of what makes options attractive.
But don’t forget — they require specific education to master. They’re not something to dabble in casually. That’s why I’m still expanding my own education and why we sometimes bring in partners for our Trading Tribe.
That wraps up this mini-series on tweaks for your trading plan across the major asset classes!
👉 Did you find this helpful?
👉 Which part of the series clicked most for you — Forex, Futures, Stocks, or Options?
Drop a comment below. Your questions and comments often spark new posts!
Either way, I’d love to hear from you.
~Hima
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