Hi, did you use passive/resting orders? ATM? Weeklies? Thanks
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Market orders, ATM, usually 2-3 weeks out. Just tried to get a sense of the day's trend. I used Fibonacci some, also. Once I had a feeling for where it might go, I used crosses on the EMA 5/20 and MACD to place the buy order. I watched it closely for the first 1/2 hour, and could determine whether things were going the right direction or if I needed to cut my losses.
Anyone here day trade options? I have been messing with that lately.
Trading options on stock with good volatility, liquidity, high delta but on any stock the option spread is high even on FB, TSLA... so when the option goes against you, I am losing a lot just because of the spread. I am going to stop it and just focus on trading the stock itself
Wouldn't you lose a lot more if you trade stocks directly and get the direction wrong? You are going to have to cut loss either way, unless you change your plan midway and hold for a bounce, but then it wouldn't be day-trading anymore.
I don't see how your math works out in favor of day-trading liquid stocks instead of options. Perhaps a couple of examples?
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Daytrading options pretty tough - got to get it right before putting on riskAnyone here day trade options? I have been messing with that lately.
Trading options on stock with good volatility, liquidity, high delta but on any stock the option spread is high even on FB, TSLA... so when the option goes against you, I am losing a lot just because of the spread. I am going to stop it and just focus on trading the stock itself
3
3acor
Wouldn't you lose a lot more if you trade stocks directly and get the direction wrong? You are going to have to cut loss either way, unless you change your plan midway and hold for a bounce, but then it wouldn't be day-trading anymore.
I don't see how your math works out in favor of day-trading liquid stocks instead of options. Perhaps a couple of examples?
Lets say FB. Stock spread is 2-3 cents. You get in, if you feel its not working you can get out immediately at a few cent loss.
However, if you were day trading the option the spread can be 10-30 cents so if you want to get out , you would take at least a 10centloss
3
3acor
Also, the further out of the money your option gets, the less volume trades and you are at the mercy of MM. The volatility of individual options makes risk control very unreliable, so might as well position size for 100% loss. This is from someone with very limited experience.
Thats why you only day trade options with the closest maturity and a high delta
Anyone here day trade options? I have been messing with that lately.
Trading options on stock with good volatility, liquidity, high delta but on any stock the option spread is high even on FB, TSLA... so when the option goes against you, I am losing a lot just because of the spread. I am going to stop it and just focus on trading the stock itself
The spread problem is why I only trade SPY options: .01 to .02 Bid to Ask Spread.
Look for option strikes that have volume of 10,000 or >.
@jeffalvinson, it just so happened I was reading your "Mechanical Trading" threads yesterday. Very interesting. What are your thoughts on not using stops at all(or having wider stops than targets)? Have you tried to back test is without(or wider) stops. If I understood it correctly, your target and stop is same distance away.
In the last 21 years of trading mathematical mechanical systems, I have traded and forward (actual trade) tested every possible combination of profit goal versus stop amount, and each combination was traded and forward (actual trade) tested several years per combination.
The combination that works the very best for my annual profit is:
Modest Profit with Equal Value Stop amount.
This setup produces the highest W/L ratio of any Profit/Stop combo.
And lets face it, if you are trading at a Reward to Risk Ratio of 1:1, the only thing that generates a decent annual profit is a Win/Loss of 70% or >.
Not using Stops generates several months in a year with no profit, or even loss, returning a much lower annual profit.
VIX Exception:
However, increasing the Profit / Stop ratio when the VIX is 20% or > is very necessary.
When the VIX is 20 or >, I increase my Profit / Stop ratio to 1.00 / .70.
This isn't much a problem for the overall annual profit because in a 250 day trade year,
"there isn't 50 days" where the VIX is 20 or > in a year. Most years are less than 30 days.
Note: If the market turns into a full blown Bear Market (2000-2002; 2008-2009), I significantly increase the Profit value enough to where I can go back to a favorable Reward to Risk ratio of 1:1 or even greater in my favor.
The reality of trading options like this over decades, is you have to look at "annual overall profit," and not weekly or monthly profit. You have to accept a few months a year of no profit or even small losses. You have to think about the long haul, year and year, decade after decade.
The combination that works the very best for my annual profit is:
Modest Profit with Equal Value Stop amount.
This setup produces the highest W/L ratio of any Profit/Stop combo.
And lets face it, if you are trading at a Reward to Risk Ratio of 1:1, the only thing that generates a decent annual profit is a Win/Loss of 70% or >.
Not using Stops generates several months in a year with no profit, or even loss, returning a much lower annual profit.
VIX Exception:
However, increasing the Profit / Stop ratio when the VIX is 20% or > is very necessary.
When the VIX is 20 or >, I increase my Profit / Stop ratio to 1.00 / .70.
This isn't much a problem for the overall annual profit because in a 250 day trade year,
"there isn't 50 days" where the VIX is 20 or > in a year. Most years are less than 30 days.
Note: If the market turns into a full blown Bear Market (2000-2002; 2008-2009), I significantly increase the Profit value enough to where I can go back to a favorable Reward to Risk ratio of 1:1 or even greater in my favor.
The reality of trading options like this over decades, is you have to look at "annual overall profit," and not weekly or monthly profit. You have to accept a few months a year of no profit or even small losses. You have to think about the long haul, year and year, decade after decade.