Day-Trading with options?

Quote from jj90:

3:1 odds OP blows out in 6 months. < 1K.
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I guess I'm the 1 in. 3:1; I started trading options almost 6 months ago and I am far from blown out ( I initially tried to keep a journal but didnt really gain a benefit from it nor was anyone really reading it)

OP, while I do not have as much experience as others here , I'd suggest trading only a couple of contracts at a time and having strict discipline with respect to stops. In addition, I'd suggest writjg down in some form your trading plan(s) and not deviating from it during the trading day.
 
Quote from shortorlong:

Excellent, I am going to be doing exactly this on Monday's open.

Two questions:

1) Why SPY options. Is it because of the extra liquidity? Would certain equities that are reaching highs have greater swings, allowing for profit goals to be reached?
Answer:
Large Liqiudity, 1 penney spread (extremely important) hugh volume, fairly priced, good comparitive movement with respect to the SPX (which can move 20-30 points in a day).
20 point SPX move = roughly 25% to 30% SPY option profit.


2) My broker (questrade) charges $9.95 per option trade + $1 per contract. Should I still give it a shot?
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Answer:
Those are horrible commisions!
Interactive brokers is < $1.00 per contract (no minimum) and gets progressively cheaper if you buy multiple contracts.
Your brokers $9.95 will generally do damage to a small account.
 
Quote from jeffalvinson:

I have taught several beginning traders how to survive the learning curve of trading using options and a small account.
You must strictly follow to these rules:
1: Keep your small trading account a "Cash Account."
"Do not" get a Margin Account with a small account!
If you have a Margin Account, you will then be subject to the daytrading rule of being shutdown if you make 3 day trades in a week.

2: Use front month SPY options in the 1.35 to 1.85 cost range
that have high trading volume (10,000 to 30,000).
They will usually have a .01 bid to ask spread (that's important).

3: For scalps and modest day trades (5 minute candle charts), use a +.30 (30 cent) profit goal and -.15 (15 cent) stop.

4: For swing trades (15 minute and daily candle charts) use
a +30% profit goal, -25% stop.
There is infrequent occassions when a swing trader can identify the beginning of a fresh change of direction for the market (reversals). In these instances use a +100% profit goal
and -25% stop.

5: Never invest more than 10% of your total option trading account into each trade!

6: Never loss more than -2% to -2.5% of your total option trading account on a single losing trade!

7: Use only brokers with no minimum fee and 1 dollar (or less) commission charge per option contract. This is real important with a small account!

By following these rules, even a small account can survive
40 or more consecutive losing trades before its wiped out.
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Hi,
I am looking to day or swing trade SPY or DIA options.

For note 2:

Which is more important the volume being 10,000-30,000, the price, or the spread? For example, right now SPY 137 puts are 2.81 with a 4 cent spread and 23,000 volume, but the next highest volume is the 136 puts at 6800.

I made a papertrade yesterday at the close on the DIA 126 puts, buying 10 at 2.13. Today's huge gap down on the dow only gave me an 15% gain on those puts, I thought it would be much much higher.

Any suggestions?

Thanks!!
Susan W
 
Quote from susan1:

Hi,
I am looking to day or swing trade SPY or DIA options.

For note 2:

Which is more important the volume being 10,000-30,000, the price, or the spread? For example, right now SPY 137 puts are 2.81 with a 4 cent spread and 23,000 volume, but the next highest volume is the 136 puts at 6800.

I made a papertrade yesterday at the close on the DIA 126 puts, buying 10 at 2.13. Today's huge gap down on the dow only gave me an 15% gain on those puts, I thought it would be much much higher.

Any suggestions?

Thanks!!



Susan W
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You need to understand various other concepts such as delta.
Delta is the dollar change in the price of the option for each dollar change in the underlying. In the case of a put, delta is negative. In absolute value delta is between 1 and 0. If you want to have a movement of say .80 for each dollar in underlying, you need to buy an ITM put. But the risk is higher.

I understand that our option gained around 0.40. That is a good money. If you could repeat the process, then compounding and time will do the main work.
 
Quote from riskfreetrading:

You need to understand various other concepts such as delta.
Delta is the dollar change in the price of the option for each dollar change in the underlying. In the case of a put, delta is negative. In absolute value delta is between 1 and 0. If you want to have a movement of say .80 for each dollar in underlying, you need to buy an ITM put. But the risk is higher.

I understand that your option gained around 0.40. That is a good money. If you could repeat the process, then compounding and time will do the main work.
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thank you. Yes my papertrade did very well today, but repeating is the hard part. What is your strategy?

Thanks again!
 
Quote from susan1:

thank you. Yes my papertrade did very well today, but repeating is the hard part. What is your strategy?

Thanks again!
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I am a net seller of premium, but the main part of my portfolio is a type of trades that relate to my handle (but I cannot share them in a public forum)!

If you do not sell premium, I recommend you look into it. If I were a net buyer of premium I would never risk more than 2% of my portfolio on anyone trade.
 
Quote from susan1:

Hi,
I am looking to day or swing trade SPY or DIA options.

For note 2:

Which is more important the volume being 10,000-30,000, the price, or the spread? For example, right now SPY 137 puts are 2.81 with a 4 cent spread and 23,000 volume, but the next highest volume is the 136 puts at 6800.

I made a papertrade yesterday at the close on the DIA 126 puts, buying 10 at 2.13. Today's huge gap down on the dow only gave me an 15% gain on those puts, I thought it would be much much higher.

Any suggestions?

Thanks!!
Susan W
More...


Hi Susan,

While you were buying DIA 126 puts near the close on Wednesday, I bought SPY 137 puts for 2.29 earlier in the day on Wednesday when the INDU (Dow30) hit my entry trigger target of 12,755 (prior resistance from Feb 1 2008).
The SPY 137P opened today at 3.05 and traded in a range from 2.66 to 3.35.
I am stll holding this trade and waiting for a 50% profit target
on half the contracts with the stop moved to breakeven on the second half. If that occurs, I am then looking for a 100% profit target on the second half of the contracts.
My time limit is Friday (02/29) at 4:00pm, when the trade will be closed regardless.
This is one of those infrequent Large Gain swing trades that I mentioned in an earlier post on this thread.


Jeff
 
Quote from jeffalvinson:

Hi Susan,

While you were buying DIA 126 puts near the close on Wednesday, I bought SPY 137 puts for 2.29 earlier in the day on Wednesday when the INDU (Dow30) hit my entry trigger target of 12,755 (prior resistance from Feb 1 2008).
The SPY 137P opened today at 3.05 and traded in a range from 2.66 to 3.35.
I am stll holding this trade and waiting for a 50% profit target
on half the contracts with the stop moved to breakeven on the second half. If that occurs, I am then looking for a 100% profit target on the second half of the contracts.
My time limit is Friday (02/29) at 4:00pm, when the trade will be closed regardless.
This is one of those infrequent Large Gain swing trades that I mentioned in an earlier post on this thread.


Jeff
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Update:
Pre-market futures were too strong in my favor this morning to use an incremental sale.
All contracts on the SPY137 puts were exited at 4.60 (100%).
 
Quote from jeffalvinson:

Hi Susan,

While you were buying DIA 126 puts near the close on Wednesday, I bought SPY 137 puts for 2.29 earlier in the day on Wednesday when the INDU (Dow30) hit my entry trigger target of 12,755 (prior resistance from Feb 1 2008).
The SPY 137P opened today at 3.05 and traded in a range from 2.66 to 3.35.
I am stll holding this trade and waiting for a 50% profit target
on half the contracts with the stop moved to breakeven on the second half. If that occurs, I am then looking for a 100% profit target on the second half of the contracts.
My time limit is Friday (02/29) at 4:00pm, when the trade will be closed regardless.
This is one of those infrequent Large Gain swing trades that I mentioned in an earlier post on this thread.


Jeff
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Great job Jeff!

Looks like we bought the puts at the same time, when Dow Jones hit a double top. If you trade the Dow alot, there's a guy on stockcharts who calls every single turn, he's impressive. It looks like it has found support so I will be closing the trade now. Too bad it's fake money :(
 
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