Part 7 Trading Master Class With Experts

Factors That Affect Option Trading Decisions

When trading options, traders must analyze several aspects beyond just price direction:

Market Volatility: Options thrive on volatility. High volatility increases premiums.

Time to Expiry: The closer to expiry, the faster time decay (Theta effect).

Trend and Technical Analysis: Price patterns, volume, and support/resistance levels guide strike selection.

Implied Volatility (IV): It reflects the market’s expectation of future movement.

Events: Earnings announcements, policy decisions, and global news can move volatility and price sharply.

A skilled trader combines these factors with proper strategy and money management.