Best strategy for small moves ?
- Thread starter J-Trade
- Start date
Just wondering if you guys think 5% to 10% would be adequate to profit target with options trades as opposed to 1% to 3%.
i assume you're talking re a 5-10% return for the option not the UL? if so, just remember when you're aiming for relatively small returns like this (i know, 10% in a short time isn't a small return but it is for options when you're loss could be just as big) that a small move in the other direction or a slight drop in iv could cause a 5-10% loss.
if you're doing this you're going to be need to be right more than you're wrong (e.g. better than 1:1 win rate) as opposed to most directional option traders who can afford to be wrong more than they're right and still make money b/c of the asymmetric return properties of long options.
Look... if u only do deep weekly itm options directionally w/ delta of .9 or more in stocks with a decent daily atr, tight bid/ask spreads with good volume and open interest... and only wait for the highest prob setups with a tight stop, u can easily be wrong more often than u r right....and a small move or IV drop will be negligible on your return compared to the gains when u r correct--easily 20-30%.
U need solid knowledge however of how to read a chart...if u dont have it..get it. If anyone doubts me--and can read a chart--- download thinkorswim platform and run their on demand replay of a past market day and watch tick by tick a high beta stock that comes into demand or supply...watch the high delta options & see how they move...and also what they do if the stock breaks resistance/support and stops u out...enter the trades in thr software & track p&l.... if u kno what ur doin & diubted me...u will b amazed.
Which stocks do you like that fit these criteria ?
How deep ITM ?
How far out in time, ie. necessarily Mon or Tues only before Friday expiration ('never traded a Weekly) ?
Would an ETF Weekly also meet your criteria, eg QQQQ ?
Btw, I read the previous poster's question as a gain in the stock, not its option.
What up Frank i actually meant a profit target for the stock itself not my profit. Basically buying an otm call or put and securing profits with a 5 to 10 % move in the stock.
I can see how you would assume i meant 5 to 10% profit due to being a some what stupid question as I know you can double your investment with a 10% move in the stock price.
Basically was seeing if 5% to 10% would be a better minimum percentage gain in the stock price to trade options as opposed to 1% to 3%.
I feel yah about trying to take a 5 to 10% profit in the options market. You would have to be highly skilled.
Thanks though for the reply!
if you're buying otm, make sure you buy yourself enough time. at a minimum go out at least 2 months ideally 3.
Aapl bidu ibm amzn crm v goog lvs gld tlt to name a few.
ITM deep enough to be getting .9 delta or higher
ETFs like SPY and IWM...absolutely. I generally avoid QQQ simply due to filtering for higher ATR equities.
With weeklies that expire every Fri, remember that due to time decay Wed Thurs Fri represent best opps for lowest premiums...Fri are unbelievable if IV is moderate to low...premiums over intrinsic value are virtually nonexistent in the right equities.... .05-.10 easily.
How can you simply say that $ .25 is not much of a gain??? If you properly put it in perspective relative to the cost of the option, the return is still phenomenal despite time decay compared to the feeble 3% return in the stock itself.
Also--obviously one would avoid .50-.60 spreads...a simple filter would solve this as there are plenty of equities with tight spreads.... I understand mentioning that helps support your argument but it's really not an issue.
How can I say that $ .25 is not much of a gain??? I can say that because this is the internet where anyone can say anything that they want to.
But in reality, I didn't say that.
If you followed the context of this thread, you'd recall that the OP indicated that he has a simple screen where a typical trade yields 1 - 3% in 1 - 5 days. I provided some examples for one of his stocks (TEX) using a maximum 3% UL gain. Now if you are one of those people who is always right and gets that maximum 25 cts option gain on every trade then congrats. But I think that most of us have a fair share of BE and losing trades and therefore, 25 cts isn't a heckuva a lot of return from a 70 cts. move in the UL nor a great max return from a trading system (the OP's screen).
I've had stellar equity trading years where I made less than half that gain (25 cts) per 100 shares. Had I been using options, I would have made far, far less, if much, at all. As I posted, earlier in this chain, if his screen can reliably predict 2-3% moves in 1-5 days on low priced stocks, trade the stock. B/A slippage and commissions on equities are lower and you don't have to fight that pesky delta or IV fluctuation. You are free to feel and do otherwise. After all, this is the internet!