Could you give an example? What do you mean by patterns? Also your averages seem to be inconsistent in their values? Which strike do you buy OTM and why?
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best option strategies for short term (5days or less)
- Thread starter cashmoney69
- Start date
Could you give an example? What do you mean by patterns? Also your averages seem to be inconsistent in their values? Which strike do you buy OTM and why?
Look for companies announcing earning during option expiration week. Suppose Apple is announcing earnings, you believe there will be an upward surprise. So, buy an ATM/slightly ITM call. Wait for the pop. Then short the stock to cover the long call. By shorting the underlying, you overcome the liquidity problem and underrinflated bid price to close out the trade. By shorting, you lock in the profit from the pop. If the stock then falls below the call's strike price, then you also profit from the fall. You would do the reverse if you were expecting a downward surprise (buy an ATM or slightly ITM put and buy the underlying after the drop. Keep your eye on companies announcing earnings the week of expiration. Keep your eye on the options volumes for those stocks on the prior Thursday and Friday for a clue.
Quote from jwcapital:
Look for companies announcing earning during option expiration week. Suppose Apple is announcing earnings, you believe there will be an upward surprise. So, buy an ATM/slightly ITM call. Wait for the pop. Then short the stock to cover the long call. By shorting the underlying, you overcome the liquidity problem and underrinflated bid price to close out the trade. By shorting, you lock in the profit from the pop. If the stock then falls below the call's strike price, then you also profit from the fall. You would do the reverse if you were expecting a downward surprise (buy an ATM or slightly ITM put and buy the underlying after the drop. Keep your eye on companies announcing earnings the week of expiration. Keep your eye on the options volumes for those stocks on the prior Thursday and Friday for a clue.
"short the stock to cover the INTRINSIC VALUE OF THE long call"
"the stock then falls below the call's strike price, then you also profit from the fall"; You profit even before the stock goes to short strike, assuming vol did not change and time value did not take its rent. Why do not just sell a put at the sametime to make it flat, and wait for the vol to sink and then release the put and/or the call, stock, or do something else.
T. henning murrey (the guy who teaches the murrey math system) has a strategy for options that implies buying option like the week before expiration when its super cheap, according to his murrey math rules
http://www.murreymath.com/
http://www.murreymath.com/
Quote from riskfreetrading:
Could you give an example? What do you mean by patterns? Also your averages seem to be inconsistent in their values? Which strike do you buy OTM and why?
Considering the OEX options, I will buy the nearest option to the money which is just out of the money. I look for patterns which have a high probability of producing moves in the OEX of 10 points or more before the expiration on Friday.
So if I buy on Wednesday, and on an average my options are 3 points out of the money. So, when I am right, my option settle is 7 points in the money and when I am wrong they are worthless.
Of course there are times when they might settle for 1 or 2 points in the money but that is how I handle it.
Another strategy is to buy these on Wednesday and put a limit order to sell them once you triple your investment on them.