1. Stay away from deep in-the-money options
The key advantages to buying options are the high leverage and the limited risk. If an option is deep in the money, it cuts down on your leverage and adds to your risk. Even though the risk is still limited, you're paying more and therefore have more to lose. You cut down on your leverage, because you need a bigger move in the underlying asset to generate a significant profit. The whole idea of leverage is to take a small amount of money and have the option to exercise into an asset worth many times as much. When buying deep in-the-money options, you tie up a lot more money that can be used for other opportunities. I don't like selling deep in-the-money options either. You tie up a considerable amount ...
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