ES Journal Archive (2006 - 2008)

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Quote from m4a1:

which month and strike would you typically use so that there is sufficient wiggle room for the option to expire worthless?
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No more than 3 months out. Typically the last 4 weeks give you the best time decay, but the farther out you go, the higher you can make the strike and still get decent premium. In addition, by holding longer times, you will have fewer commissions. (Very important). I always start scaling in since I don't know where the top exactly is. However, I do know that the top is not where the MACD is below the zero line and the RSI is beginning to diverge. I get out of calls there if I haven't already. Not an exact science--doesn't need to be.

Note: I forgot to mention in this discussion that if you sell premium that is 8 weeks or less, it is fine to bring that strke price a lot farther in. I didn't want it to sound like you would never sell anything less than 3 months out.
 
Quote from m4a1:


Edit: hmm...wait a sec. unless at the time that you short the call, your strategy says that the payoff will most likely end up near your entry price and there are rarely any outliers.
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I don't understand what you are getting at here. Can you rephrase or elaborate?
 
Here is my plan for today. I am going to trade 2 groups of trades. 1st one will be based on daily probability of low @ 1294 for a stop and target of 1315 or just under. This will be averaged on pullbacks, therefore the whole position will be in 4 groups of entries, keeping stop @ same 2% max risk to capital. 2nd group will be based on my usual daily S/R. I think (certainly looks that way to me) we are all go to 1315 today.

First entry 1307.50 (1/4 position)
Second @~1304.00 (1/4 position)
Third @~1300.50 (1/4 position)
Fourth @~1297.00 (1/4 position)
 

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i was thinking that the tradeoff should negate the benefit, unless the distribution of price at expiration is stacked in such a way that most trades end up near the entry price, in which case it will be in one of the 3 profitable zones.

what would be good strikes to use relative to the current trading price of the instrument? is it just a matter of where you think is the high point and whether there's enough trading volume at that strike?

Quote from Buy1Sell2:

I don't understand what you are getting at here. Can you rephrase or elaborate?
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Romik, I have determined that you are correct in your assertion that for a daytrader, a specific profit target must be adhered to. This of course would fly in the face of my positioning for greater moves. However, I agree that intraday, a profit target should be used and for position trading, you can let the trade run. The one place that you could let the trade run intraday would be with what I was doing at the beginning of the journal when I was adding to my positions after being stopped. Otherwise, a strict profit target should be used. My research shows that by taking a 6 point profit on my signals, it creates more income by about 40 percent than just letting the trade run. I believe that this is due to the oscillations that are part of the process in daytrading and has to do with the fact that there are an enormous number of daytraders doing just that and creating intraday support and resistance that has very little to do with the daily charts.

Thus my mindset when it came to daytrading was only half correct in that the signals were good but the exit was not proper. I also believe that the greed factor comes into play very much intraday. =="Hey I don't want to miss out on the whole move today" -- That kind of thing.
 
Quote from m4a1:

i was thinking that the tradeoff should negate the benefit, unless the distribution of price at expiration is stacked in such a way that most trades end up near the entry price, in which case it will be in one of the 3 profitable zones.

what would be good strikes to use relative to the current trading price of the instrument? is it just a matter of where you think is the high point and whether there's enough trading volume at that strike?
More...

Yes , it all depends on how the market is behaving. I generally like to be 40 to 50 points above market. Thus I can reap more upside , while having the premium decay even with an upmove over time.
 
Quote from Buy1Sell2:

Triple top on hourly chart? Comments? Thoughts?
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depends, though I see daily as bullish at the moment. Very short term depends on the upper channel break on the chart. That's how I see it anyway.
 

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Quote from Buy1Sell2:

Romik, I have determined that you are correct in your assertion that for a daytrader, a specific profit target must be adhered to. This of course would fly in the face of my positioning for greater moves. However, I agree that intraday, a profit target should be used and for position trading, you can let the trade run. The one place that you could let the trade run intraday would be with what I was doing at the beginning of the journal when I was adding to my positions after being stopped. Otherwise, a strict profit target should be used. My research shows that by taking a 6 point profit on my signals, it creates more income by about 40 percent than just letting the trade run. I believe that this is due to the oscillations that are part of the process in daytrading and has to do with the fact that there are an enormous number of daytraders doing just that and creating intraday support and resistance that has very little to do with the daily charts.

Thus my mindset when it came to daytrading was only half correct in that the signals were good but the exit was not proper. I also believe that the greed factor comes into play very much intraday. =="Hey I don't want to miss out on the whole move today" -- That kind of thing.
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so, you will give it another try, maybe?
 
Quote from romik:

depends, though I see daily as bullish at the moment. Very short term depends on the upper channel break on the chart. That's how I see it anyway.
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240 really isn't showing downside yet-- is it?
 
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