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As options traders, we are working with a limited timeline. We may hold options that expire in a day, a few weeks, or a couple of months. Option decay is our enemy. We lose value if our positions are not moving – literally from the start of the trade. This creates fear, and fear can lead us to overtrading short-term options.

Monitoring positions day-to-day even hour-to-hour requires our full attention. Step away from a short-term trade, and you’ll feel some pain. I know – I have experienced it many times! While I try not to overtrade, it is truly difficult not to respond to the hourly and daily ticks that can throw off a short-term trend.

Overtrading may be the result of various things, like too much exposure, not enough time to let your options work, an un-balanced account tilted toward calls and without puts, and/or being distracted by strategists and analysts on CNBC.

How to stop overtrading short-term options

If you find yourself overtrading and pushing the buy/sell buttons constantly because you’re worried about being on the wrong side of a market turn, I have some advice for you.

First, be aware of your own actions. Notice when fear starts to creep in and the impulse to overtrade starts to build.

Second, make the changes necessary to have a higher win rate for your short term trades. This is all about position sizing. Managing risk is our number one concern at all times. If we are managing our risk properly, then we are prepared for any outcome (good or bad).

Third, take risk off when you are able and NOT when the market is forcing you to. What does that mean exactly? If you’re having a great trading day and you’re in sync with the market trend, take profits before the market reverses.

We’ll never know the exact time of a change in trend, but if we book profits on our own timeline, we will have much more control over our buy/sell decisions. And overtrading will be a thing of the past.

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