Because options are wasting assets, losses and gains occur in relatively
short periods of time. You can't plan to buy and hold options,
or you risk missing the
expiration
date
or an unexpected event that affects the price
of the underlying instrument. It's also important to fully
understand all potential outcomes of a strategy before you open
a position. And once you do, you'll want to be sure to stay
on top of changes in your contracts.
Since an option's
premium
decreases rapidly as expiration nears, you should frequently evaluate
the status of your contracts, and determine whether it makes financial
sense to close out a position.
Word to
the wise
If you use a
margin
account,
you always risk facing a margin
call if your investments drop in value, so it's
important to monitor the standing of any options traded
on margin.
Because options are wasting assets, losses and gains occur in relatively
short periods of time. You can't plan to buy and hold options,
or you risk missing the
