Daytrading options

Quote from dagnyt:

If he's going to do that, he's better off trading the stocks that he knows.

That's where we began. day trading stocks. He was looking to use options as a replacement. Hopefully, he has changed his mind.

Mark
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Hi Mark, thanks for your very informative explanation and yes you are convincing. It's unusual to see someone with a genuine concern for others and I appreciate that.

For the person who suggested QQQQ, I have found an edge with a few stocks. But as I explained, I cannot trade any size with them. I'm looking for moves of 2-3% on average, so now I understand that options aren't going to do anything for me there.

I was naively thinking that if the stock goes up 2-3% that the option could go up 2-3% and that going the option route would let me trade a much larger size.

So I bought "Options Made Easy" and well it's not easy at all. I'm half way through the book and as confused as ever. ;)

Back to the person who suggested NQ (nasdaq futures) instead of QQQQ, I'm currently trading the e-minis but my strategy is totally different there as the edge for the small stocks doesn't work with the futures. No surprise there, there are millions of people all over the world looking for edges whereas small stocks often receive little or no attention. :)

I'm still interested in learning to use options as a hedge for long term trades however, so I'll keep reading the book.

For example, I made a big mistake and bought GDX a few months ago. Actually the mistake was not to have used my stoploss. I think that if I had bought some OTM puts on it back then then I could have reduced risk and probably even made money on it.

This is a totally different topic as we're not talking about daytrading here. But does this make sense? Or is it better to just use a stop loss and exit the stock? It seems that by buying puts one limits the downside but the insurance has a cost which can impact the upside. When the upside target is 2x then the cost of the insurance seems minimal.

Thanks again to all for the input and suggestions. The suggestion for nasdaq futures is a very good one, just not what I need for the stock edge. So for that I'll just trade what I think I can get away with.
 
I have some stocks I trade, I always enter on the open and exit on the close, usually the same day but sometimes I hold a week. Many of the stocks are low volume and so I'm limited in how much money I can trade without driving the price.
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If the stocks have low volume, it's likely that their options will be illiquid and will have wider B/A spreads. And because you're fighting IV, time decay and a lower delta, it's much much harder to scalp with options.

I day trade illiquid stocks(no options) because they're like the Pony Express... the next horse (bid or ask) can be miles away. Because of this, they tend to pop up/down in fits and spurts and can be scalped. My approach has been to take whatever volume is available and try to find as many stocks as possible that meet my criteria.

If you have an edge, take advantage of it. If there's limited volume, there's not much more you can do. Stick with what works for you.
 
Quote from cunparis:

Hi Mark, thanks for your very informative explanation and yes you are convincing. It's unusual to see someone with a genuine concern for others and I appreciate that

Thanks


I was naively thinking that if the stock goes up 2-3% that the option could go up 2-3% and that going the option route would let me trade a much larger size.

You would have to trade deep in the money call options - if they exist -, but the wide markets would hurt you.

So I bought "Options Made Easy" and well it's not easy at all. I'm half way through the book and as confused as ever.
Try: The Rookies Guide to Options


This is a totally different topic as we're not talking about daytrading here. But does this make sense? Or is it better to just use a stop loss and exit the stock? It seems that by buying puts one limits the downside but the insurance has a cost which can impact the upside. When the upside target is 2x then the cost of the insurance seems minimal

Under 'normal' circumstances, puts are not as expensive as now. But they are always far from free.

Mark
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Quote from options4me:

Look at QQQQ for daytrading of options.
Liquidity is NO problem.
Made one daytrade today on it and got pretty much instant fill on the open and close.

The trick to trading options is you have to look for a large Open Interest and volume. Only trade those strikes if you want to be fluid. Buying on the open and selling on the close may work, but there are better ways.
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Just look at Friday's movement on the 32 Call option. (.QAVKF)
This is perfect for daytrading. 2 major swings in the morning, a 25 point move , then a 44 point move.
Lot of movement, low spread, TONS of volume.
I have been making approx $300 - $400 per day, daytrading QQQQ.
All you want is predictable movement ranges, low spreads, and high volume.
 
Quote from options4me:

Just look at Friday's movement on the 32 Call option. (.QAVKF)
This is perfect for daytrading. 2 major swings in the morning, a 25 point move , then a 44 point move.
Lot of movement, low spread, TONS of volume.
I have been making approx $300 - $400 per day, daytrading QQQQ.
All you want is predictable movement ranges, low spreads, and high volume.
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Here is my trade today for an example: +$360
2j0b7dy.jpg
 
Quote from cunparis:

I trade nasdaq futures, I'm curious what advantages options have over futures.
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I guess my take on this would be, you will NOT have a margin call if you trade options vs Futures. I have trade futures on commodities in the past and the dreaded margin call was always an account killer. The options has the additional leverage over trading the stock. I do not plan to hold the options for long, just long enough to get a nice move, then get out. Take what the market gives you with the least amount of exposure.
 
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