Risk Management

Risk management is key as well.  If you are trading options and the price is falling check the news on the stock.  Only hold the option if you think it has a chance of getting back to where you want it to go in enough time to make a profit.  If it is a major development about the company and they are going bankrupt you better pull the stop on your trade and save whatever money is left.  If that whole industry is falling on some long term news, get out.  Sometimes you can stay in the trade because there is no news and the stock is just reacting to technical data.  As long as you have time to recover your losses and realize a gain you should be fine.

Also don’t overexpose yourself to the same industry.  Get options that are in different sectors like technology, retail, energy, etc.  However, don’t buy a stock that you know nothing about.  Familiarize yourself with the industry and the stock you are potentially trading.  Watch how it reacts to different market conditions.  Look at the price spread of the option to see how long it takes for the option price to increase to the level you want it.  Options prices don’t move like stock prices unless the Delta is large and even then volatility and other factors affect the price.  Study how the stock’s options prices move to better anticipate what will happen when you trade it.