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The Six Rules for Stock Options Trading

Posted July 9, 2008

“Never go short any stock. If you think the stock will drop, buy puts. That way, you will limit your losses if you are wrong and you will make a bundle if you are right.” — Steve Sarnoff

Blogger’s note: Steve Sarnoff, son of stock options trading legend Paul Sarnoff, gave his Penny Sleuth U.S. readers a definitive set of options trading rules from his father recently. And I thought you’d appreciate a look. You can find the article here or read on below.

by Steve Sarnoff

Baltimore – (TFN): Stocks ended the holiday-shortened trading week looking for a bottom. Will they find it this week and test sellers’ mettle by mounting a strong snapback rally or will buyers continue to spit for distance like watermelon seeds at your 4th of July picnic? Time will tell…

So in light of this uncertainty, I’ll share my father’s strategies for both profit and preservation of risk capital in the face of future wild stock-price swings.

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Paul Sarnoff’s Stock Option Trading Rules

1. Never go short any stock. If you think the stock will drop, buy puts. That way, you will limit your losses if you are wrong and you will make a bundle if you are right. Read on to learn five more options trading rules.

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