Anyone daytrade or swingtrade ES options?

[dmo]

Quote from increasenow:

there should be a "user friendly" website that would provide the SPAN for a given option that is sold...someone has got to offer that for free and you just go to the website and "Click"...any thoughts?

Increase, I think you just figured out how you're gonna make that first million. Or maybe it's your second or third million. Every million helps.

SPAN makes money off selling software to people who want to do exactly what your purported website will do for free, so I wonder if they would launch a legal challenge to such a site. Truth is though the info that would be needed to calculate margins (settlement prices, risk parameters) belong to the exchange, not to SPAN. So it just might work.

 

[increasenow]

dudes...the ES options are awesome...been papertrading them...looking to go live next week...will be great volatility with sept 08 ES options expiring this coming Friday...you been trading them?

 

[Sandybestdog]

Hi I have occasionally traded es futures when the market was either not open or I didn't want to do any daytrades on SPY. If someone could please explain this one to me I'd be very grateful.

Last night with esu8 down over 40 points I put in an order to buy the 1265 september call. Here are the prices and times.

1:55 am es at 1215 1265 call is 6 bid 7 ask.

place order to buy at 5

7:03 am get filled at 5, es at 1205

10:50 sell at 5.50 es is at 1229

Could someone please explain how I make 24 points and the option only goes up half a point? I have traded a lot of options before, but can't figure this one out. The only thing I can think of is a big drop in volitility, which did happen at the open, but still. Even if the delta was .20 it still should have gone up at least 4 points. I only held it for 3 hours , so I don't see how time decay could have impacted it that much, even if there is only 4 days till expiration. Thanks for any responses.

 

[dmo]

Quote from Sandybestdog:

Hi I have occasionally traded es futures when the market was either not open or I didn't want to do any daytrades on SPY. If someone could please explain this one to me I'd be very grateful.

Last night with esu8 down over 40 points I put in an order to buy the 1265 september call. Here are the prices and times.

1:55 am es at 1215 1265 call is 6 bid 7 ask.

place order to buy at 5

7:03 am get filled at 5, es at 1205

10:50 sell at 5.50 es is at 1229

Could someone please explain how I make 24 points and the option only goes up half a point? I have traded a lot of options before, but can't figure this one out. The only thing I can think of is a big drop in volitility, which did happen at the open, but still. Even if the delta was .20 it still should have gone up at least 4 points. I only held it for 3 hours , so I don't see how time decay could have impacted it that much, even if there is only 4 days till expiration. Thanks for any responses.

It seems the problem is that you badly overpaid in an illiquid and panicky market.

Let's use 5 days as time remaining in those options. Using your numbers, you paid 41.5% IV for the call. You sold it 3 hours later for 31.1%. That sale actually seems pretty good - but not enough to make up for having overpaid so badly.

Assuming a buy price of 5, in order for you to have bought that option at the same IV you sold it at (31%), the underlying would have had to be 1227 at the time you bought it. By paying 5 for that option with the underlying at 1205, you were paying 41.5%, which is just way too much.

You didn't ask for advice but I'll give you some anyway. You HAVE to know what IV you are paying, and what IV has been trading at. Otherwise you are trading blind. Would you buy GOOG without having any idea what price you are paying? Of course not. But buying an option without knowing the IV is no different.

 

[ammo]

dmo,thanks for the explanation, can you explain a simple way to compute iv in your head,i probably won't understand it cause i never learned the greeks,just directional trader, i guessed delta by adding option price of other strikes aqgainst my option price and used them as hedge when wrong, for instance bought a call at 12,went to 10, i could sell a 3 and 7 dollar call against to stay kinda neutral,or two 5's

 

[dmo]

Quote from ammo:

dmo,thanks for the explanation, can you explain a simple way to compute iv in your head,i probably won't understand it cause i never learned the greeks,just directional trader, i guessed delta by adding option price of other strikes aqgainst my option price and used them as hedge when wrong, for instance bought a call at 12,went to 10, i could sell a 3 and 7 dollar call against to stay kinda neutral,or two 5's

You think I calculated those IV's in my head? I'm flattered Ammo, but you give me way too much credit. I don't know how you'd do it in your head - I rely pretty heavily on computers to crunch my option numbers.

There are free option calculators all over the internet. If your option prices don't act in a way that makes sense to you - look at their IV's. It's really the one "constant" in evaluating the cheapness or expensiveness of an option. Not that it remains constant of course, just that it allows you to compare options with more or less DTE, or with different underyling prices.

 

[Sandybestdog]

Quote from dmo:

It seems the problem is that you badly overpaid in an illiquid and panicky market.

Let's use 5 days as time remaining in those options. Using your numbers, you paid 41.5% IV for the call. You sold it 3 hours later for 31.1%. That sale actually seems pretty good - but not enough to make up for having overpaid so badly.

Assuming a buy price of 5, in order for you to have bought that option at the same IV you sold it at (31%), the underlying would have had to be 1227 at the time you bought it. By paying 5 for that option with the underlying at 1205, you were paying 41.5%, which is just way too much.

You didn't ask for advice but I'll give you some anyway. You HAVE to know what IV you are paying, and what IV has been trading at. Otherwise you are trading blind. Would you buy GOOG without having any idea what price you are paying? Of course not. But buying an option without knowing the IV is no different.

Thanks so much for the response. I figured it had to do something with the volatility. I know the options can have funky spreads after hours, but the spread at the time was only a point and I put in a limit a point below the bid. So it's not like I got screwed on a bad quote. You can kind of tell what the option should sell at by looking at the closing prices of SPY and comparing them to the es. I thought 5 points for an option 60 points out of the money, 5 days from expiration was a little expensive.

I noticed at the open, when everything rallied, the es would go up 5 points, then the option would go up 1. Then the es would go down 2 points and the option would give back the whole point it just made. I looked later and saw that the vix was crashing at the time. I guess I understand how IV works, I've just never had to use it because I don't trade options like that. I just use them for leverage. I never buy at or out of the money options unless there is a reason. I only buy deep in the money, with very little time value.

I did the same thing last week when everything opened up 40 points. I bought a put for around 5 points in the overnight hours and sold it shortly after the open for a 2 point profit. I know we always look at something and say it can't go any lower or higher, and what a great deal it is, but shorting the futures when they open 40 points up on a Sunday on fake news is really a no brainer.

Unfortunately I think I am going to take a little break from trading. This just seems too hard right now. When you lose you have to pay commissions, spreads, fees, get screwed by the market maker, and oh yea, you have to still pay the loss. When you win, like today, you still have to do all of the above, except they let you keep a little. The math just doesn't add up. Good luck to everybody.

 

[dmo]

Quote from Sandybestdog:

I know the options can have funky spreads after hours, but the spread at the time was only a point and I put in a limit a point below the bid. So it's not like I got screwed on a bad quote.

One more thing to keep in mind - you thought the spread at the time was "only" a point. But that option had a delta of about .10, so assuming you buy the offer and sell the bid, the ES would have had to go up 10 points just for you to break even, everything else being equal.

I just cannot overstate the importance of taking into account greeks and volatility if you're trading options. Otherwise you're just flipping a coin - one that's weighted against you.

 

[covered_call]

I've swing traded options on ES and there's great money to be made there. I've sued the same strategies for 15 years with little change (well, it's a small contract and electronic...but strategy stays the same).

As mentioned earlier in the thread, volatility is your friend and volatile moves are your opportunity to make money. Panic sellers are a godsend. Place your limit orders and let the market come to you. Swing trading takes patience.