5 F&O Trading Mistakes You Should Avoid

Published : 16 June 2023

#Mistake 1: Trading without proper research

You should have a clear understanding of how futures and options work. 

#Mistake 2: Not being receptive to new ideas

You should adapt to the constantly shifting market conditions and change your strategies as necessary.

#Mistake 3: Using the leveraging facility excessively

Buying more shares will guarantee maximum profits is the belief of investors. Avoid investing your valuable money in one location at once; instead, start with a small amount and then gradually increase it.

#Mistake 4: Role of time decay

As expiry approaches, time decay eats away at the premium. This primarily affects option buyers, who remain hopeful of a significant movement to book profits but end up facing losses. Having a disciplined approach and implementing it is the best way out.

# Mistake 5: Misunderstanding risk

Though losses are capped at the premium paid, the risk is expressed as a percentage, which in the case of option buyers may be 100%. Consequently, option buyers frequently end up taking the biggest risk of losing all of their invested money in the pursuit of "unlimited" profits.