" We’re only as good as our fundamentals, but that is easy to forget when stocks are dancing around record highs.

Unbridled greed is probably the greatest reason so many people make bad investment decisions and lose money with stocks, and this is especially true when it comes to options.

First, protect yourself. Always have a preset percentage profit when you trade options.

Some institutional investors take profits when their options trades make a profit of 70% to 80%, though some nonprofessionals take profits when they have made a return of 50%. Pick a percentage that reflects your investment style. Stick to the discipline, and your options trading will become businesslike and far less emotional.

Disregarding profit targets means that you are risking large profits for a comparatively small additional amount of money. Since longevity and repeatability are the goals of good investing, follow your discipline, or roll to another expiration and strike. In a rising market like this one, we need not cover imploding positions, though some automatically adjust positions after a 10% to 20% loss.

Knowing how to “roll,” or how to adjust positions before expiration, is important and rarely discussed.

When you reach your profit percentage, review five-, 20-, 50-, 100- and 200-day simple moving averages to see if the stock is above support, under pressure, or poised to break out or collapse. Check corporate investor-relations websites for events, including earnings and analyst-day meetings, which often move stocks even more than earnings. Do the same for other stocks that influence your stock.

This will sharpen your stock view and help with strike selection. Choose expirations that optimize the probability of additional profits. Do this every time you trade, and you’ll do a lot to increase your odds of success. Remember, the market is never wrong on price, but it has a horrible sense of timing.

Learn to think of put and call options in terms of deltas, not strike prices, to refine your trading and move closer to the inner workings of options. Delta measures options price changes in response to the associated stock’s price move. You can find options deltas on most, if not all, e-broker platforms. You need to select a display format that includes the so-called Greeks, which include delta and other measurements that are used to determine the value of an options contract.

In simplest terms, a 100-delta option moves in lockstep with the stock. A 20-delta option—always actively traded—can be thought of as capturing 20% of the stock’s move, though the reality is complicated. A very low delta—say, below .05—means an option is far away from the stock price and the option price is essentially little influenced by the stock’s behavior.

The market’s oral tradition teaches that deltas express probabilities. Thinking in terms of deltas, rather than strikes, helps to hardwire you to think about trading and investing using probabilities, rather than just hoping momentum does what you want.

You then need to integrate deltas into your portfolio management. You’ll likely gravitate to the same strikes whenever you trade. If you sell puts—a popular trade—sell 30 to 40 deltas. The same is true for upside calls. Speculate if you want to speculate, and hedge if you want to hedge. Have as much conviction about your options trades as your stock. Don’t get so cute with options strategies that you fail to meaningfully capture the anticipated stock move. With options, you can be right on the stock, but wrong on the options. Guard against it.

If you build upon these disciplines, you’ll become a better investor, and more importantly, you’ll understand that the essence of options trading is a way of thinking and of optimizing decisions. A deeper embrace of the intellectual philosophy that defines the options market has many unexpected benefits. You’ll soon find that options analysis can even improve how you make decisions in your nonfinancial life.

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