There are several important stages in a trade, some that include nuances to it that are particular to each trader. Here are just some of the stages:
- Stock scans to identify new stocks that are setting up
- Trade preparation that includes things like: are there catalysts around the corner, what is the short interest, how is volume recently, etc.
- Do I want to trade the stock and/or options?
However, there are several key moments where all traders have to answer one simple question: trigger, or not? If you are going to trigger, what trade do you put on?
I wanted to share an example today in my trade of $GOOG where I was put in that position, stock price hits my trigger, but I had given myself too many choices:
- go long the stock on a $600 hold
- initiate a Bull Risk Reversal using the May 580 Put and 610 Call
- Sell the May 580 Put
- Buy the 600 Call
- Buy the 600/610 Call Spread
Yikes! Decision overload. I ultimately elected to go long the May 4 weekly Call for 8.30 – this is what I was watching for this option strike:
The trade entry stage is certainly a KEY point, so don’t give yourself the added pressure of having too many choices once you are at the trigger.
Keep it simple.