Happy Monday, traders…
Jeff here.
I hope you’re having a great Martin Luther King / Inauguration Day, and enjoying your time off from the markets…
But great traders don’t stop working just because the market is closed. So, I want to talk about something crucial that could make (or break) your next trade.
If you’ve been in the options game for a while, you know success doesn’t come from random picks or gut feelings.
It comes from precise decision-making within a proven strategy.
Two traders can buy options on the same stock — on the same day — but their results can vary dramatically depending on a handful of critical decisions.
One trader might walk away with huge gains, while the other is left scratching their head, wondering why their trade flopped.
The difference is all in the details, especially when it comes to options trading…
If you’ve ever found yourself losing money on options after guessing the right direction, chances are it wasn’t the stock that failed you — it was how you designed your trade.
Today, I’ll break down three decisions that can mean the difference between an account-changing win and an annoying loss…
Choosing the Right Strike Price
If you follow my trade alerts, you’ve probably noticed a pattern: I never buy contracts too far out of the money (OTM).
There’s a reason for that — it’s one of the easiest ways to sabotage a trade before it even gets started.
Picking a strike price too far OTM is tempting, especially for new traders. The contracts are cheap, and the payout potential looks enormous.
But those trades rarely work out. With short-dated options, OTM contracts lose value rapidly if the underlying stock doesn’t move decisively in your favor.
When you buy far OTM options, you’re fighting against time and probability. The farther OTM you go, the less likely the stock will reach your strike price.
And if the stock doesn’t make a move quickly, your contract’s value will evaporate like an ice cream cone on a hot summer day.
This is why I focus on at-the-money (ATM) or slightly OTM contracts.
Yes, they’re pricier, but your odds of success are way higher. The contracts hold their value better, and you’re more likely to profit from smaller moves in the underlying stock.
This simple adjustment — choosing strikes closer to the current stock price — can mean the difference between a frustrating loss and a solid win.
Choosing the Right Expiration Date
Now let’s talk about what I consider the real key to options trading success: picking the right expiration date.
Your expiration choice should always match your level of confidence in the trade. If you’re convinced that a move is imminent—within the next day or two—then short-dated options are the way to go.
That’s why my Burn Notice trades are on contracts expiring one week out. I place these trades in the late afternoon and sell the position the following morning.
I use weekly options because they’re cheaper. And if the trade works, the returns can be explosive.
But don’t get carried away. This strategy only works when you have A+ confidence in a fast, decisive move.
For trades where the timing isn’t as clear — or the stock is slower-moving — you’re better off buying longer-dated contracts. A few weeks out can give your trade more breathing room (and reduce the impact of time decay).
Personally, I avoid day trading options. My style is to buy short-dated, close-to-the-money contracts and hold them overnight.
But every trader has to figure out what works best for them.
Choosing the Right Entries and Exits
Having a game plan for your entries and exits is non-negotiable. Winging it with your timing is a surefire way to lose money in the long run.
For entries: If you’re planning to buy puts, ask yourself: Is the stock sitting near a key support level? If so, it might be better to wait and see if it breaks below that level before jumping in. Buying too early can leave you stuck if the stock bounces back.
For exits: Always have a price target in mind. Better yet, set a limit order at your desired exit price. This way, you remove emotions from the equation and ensure you take profits when they’re available.
Another tip: Pay attention to the premium ranges throughout the day. Watching how contracts trade at their high and low points can give you a better sense of what to expect and help you buy at near the low of day.
The strike price, expiration date, and timing of your entries and exits all work together to determine your success.
Get these wrong, and you’ll find your trades underperform, even when you guess the right direction.
Get them right, and the sky’s the limit…
Happy trading,
Jeff Zananiri
P.S. While the rest of the market is scrambling to position themselves in this volatility, I’m on a 7-win streak with my Burn Notice trades…*
If you want to start getting in on these setups before they take off, there’s only one place to start…
This THURSDAY, January 23 at 10:00 a.m. EST, I’m hosting a LIVE WORKSHOP to reveal my Burn Notices for next week.
Stop guessing, start burning — Click here to reserve your seat!
*Past performance does not indicate future results