The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about options trading golden rule number eight which is ample cash reserve. This one again, is something that not a lot of people really understand and even if you understand it, you probably don't practice it and it really comes down to a simple factor of greed. A lot of people when they get started in options trading, they realize that options trading has the potential to generate money quickly for them and it's because we’re using leveraged products that are leveraged against stock. And so, it's a little bit more risky, but they see a potential trade that they put $50 in generate $100 and so, now, they want to scale up and they want to throw a bunch of cash at it, but that's the wrong approach. And so, what we suggest here is that you definitely have ample cash reserves in your account. Somewhere between 50%, 60% of your account should be in cash pretty much at all times. Now, this doe