Complex options strategies

M

michael_b

Greetings everybody:



I will appreciate imputing your experience in the discussion of Options trading - both simple and advanced strategies like straddles, spreads, butterflies, ratio spreads, synthetic straddles etc ...

Can anybody recommend daytrading Options through direct access brokers?
Is it possible to Day Trade options spreads and straddles?

Thank you for your feedback,

 
I sometimes daytrade options, however I don't daytrade spreads or straddles. I use Interactive Brokers to do all my options trading, and have had no problems whatsoever. One thing I do look for if I'm trying to daytrade options is to use the PHLX or ISE exchanges, as my orders execute there immediately, as opposed to AMEX or CBOE (especially AMEX, geeeeeez!) where my order can hang for a couple of minutes before I get filled or miss the market.

Regarding strategies, in my long term account on volatile stocks I'll do a kind of naked strangle so to speak. For instance, on a stock like JNPR where the premiums are high, you can sell let's say the 105 calls and the 75 puts. Let's also say you took in an average of $6 per contract. Basically you've given yourself a 42 point trading range for JNPR to stay within for you to make money or break even at the worst, and a 30 point trading range for you to make maximum profit.

I benefitted greatly from this strategy in January on JNPR, having sold back in December the Jan 140 calls and 115 puts. I took in $12,000 for selling those options. JNPR closed at expiration at 136, keeping me from being assigned, and I got to pocket the entire premium.

Of course, the danger in this strategy is if the stock actually moves outside your "safe range", in which case you'd need to decide whether to let yourself be assigned the stock or close out that half of your option position for a loss.
 
I DAYTRADE ONLY OPTIONS; MY SUGGESTION THOUGH IS TO LOOK AT MORE COMPLEX POSITIONS IN A LONGER TIME FRAME. THE COMMISIONS ARE A TERRIBLE DRAG ON MULTI-LEGGED POSITIONS TO SAY NOTHING OF THE TIME VALUE RUNNING AGAINST YOU ON EACH LEG. SPREADS ARE NOT SO BAD BUT BEWARE THE MORE ESOTERICS.

IF YOU HAVEN'T DONE SO, READ "OPTIONS; ESSENTIAL CONCEPTS AND TRADING STRATEGIES"

GOOD LUCK
 
ZBOY; I was really surprised to read your comments about the PHLX. I try to avoid it like the plague. In my experience they are usually so far from the market that its a waste of time even considering an execution there....I admit it sometimes works to catch them behind the curve and shoot an automatic execution at them but often times that even gets ignored. I much prefer CBOE. Again this is just based on my experience.
 
white,

You're right that the PHLX often does not have the best inside quote. But since I daytrade stocks that move quickly, and therefore the option prices move quickly, as long as the quote on PHLX or ISE isn't too far from the inside, I'm willing to lose the spread to know that I'll get filled immediately. If the quote is too far away, I'll take my chances with CBOE or PSE, and AMEX as a very last resort.
 
ZBOY; I understand where you're coming from now. I recall last year trading Qualcom ( I think) calls. I did execute a couple trades on phlx but usually ran into "fast market conditions" so everything was manual and slow anyway.

Good luck
 
zboy,
have you used bestex lately for options? I was under the impression bestex for options will now check to make sure an exchange has the autoex on and will only route to an exchange with autoex off as a last resort. Another thing you may want to check is the Primary market maker for the option classes that you trade on the ISE. You'll notice that some firms will rarely honor their quotes while others like Timber Hill will. Thus you may want to set up your routing preferences accordingly.
 
def,

Yes, I have tried using Best Execution, and unless some sort of change has been implemented very recently (i.e. the past week or two), I've had many times when using Best Ex that my order would get routed to the AMEX, where it would hang and hang until I either cancelled it or pulled my hair out waiting to see if and when I'd be filled. However, I'll try using it again to see if there's any improvement from my perspective.
 
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