In general, I feel more comfortable calling price direction than volatility. Over the past year or so, I have been relatively successful trading long DITM calls or puts as a proxy for the underlying. I am trying to figure out if this is really the best approach towards grabbing a small move in my direction -- say for instance, half the 14-day ATR in the underlying.
In the past, I've traded ATM calls with limited success, and to the best of my knowledge it seemed the reason I wasn't grabbing the move delta might have predicted was because volatility would drop as the trade moved in my direction. However, those were longer term swing trades, so I don't know if that experience would hold for smaller intraday moves.
Other options would be spreads (debit or credit), roughly ATM to get R/R close to reasonable. Again, my limited experience has been that these don't tend to "come in" until close to expiry, but I can't really explain WHY that might be, especially since theta should be spread off. I do like the fact that vega and theta are reduced, but my helpful gamma is also lost, too.
I'm seeking any advice, including links to studies or books that might specifically discuss the use of option strategies for short-term directional trades. Thoughts? Appreciate the help (in advance).
In the past, I've traded ATM calls with limited success, and to the best of my knowledge it seemed the reason I wasn't grabbing the move delta might have predicted was because volatility would drop as the trade moved in my direction. However, those were longer term swing trades, so I don't know if that experience would hold for smaller intraday moves.
Other options would be spreads (debit or credit), roughly ATM to get R/R close to reasonable. Again, my limited experience has been that these don't tend to "come in" until close to expiry, but I can't really explain WHY that might be, especially since theta should be spread off. I do like the fact that vega and theta are reduced, but my helpful gamma is also lost, too.
I'm seeking any advice, including links to studies or books that might specifically discuss the use of option strategies for short-term directional trades. Thoughts? Appreciate the help (in advance).
