Given some knowledge...

M

malaxi

Hi All, it's been a while since I've traded any options and even then it was only some tech stocks I was pretty familiar with.

I've got some basic questions for the group: If you were told each morning whether a certain stock or index (eg. OEX) price was going to go up or down that day - but you weren't told how much the change would be - could you profit from that? You can choose whatever ticker you're interested in.

If you could, what if the prediction was right only 75% of the time? Could you make enough to cover your trading costs?

Thanks!
 
If you knew the direction with certainty, you could write options and buy them back at a later date after the time premium eroded a bit, locking in your profit. If the equity is going up; write puts. Down; write calls.

Of course, options (unless you're writing deep in the money options) will not fluctuate in price as quickly as equities, so you would have to be in the trade a bit longer. On the other hand, you might make up for that with higher leverage.


Regards,
Steve
http://www.options-trading-resources.com/EliteTrSig

Option trading information and tools the pros wish they had! A former Chicago Mercantile Exchange employee reviews stock option trading software, books, and web sites and online income opportunity.
 
Would that work even if you only had daily information to rely on?

The overall trend might be down for the next 2 weeks, but you know it's going up tomorrow. Since you have a reasonable accurate daily (but only daily) prediction, do you think you could you still make money writing puts and buying them back on the same day?

I guess that's coming down to whether or not there are options that are volatile enough to make money from in one day.
 
In most cases, options prices do not move quick enough to daytrade. Take a look at the daily price action of any option, and you will find a much tighter range than the underlying equity. You also have to take into account the amount of money you would lose due to slippage (buying at the ask price and selling at the bid price). Options are typically not as liquid and have larger bid-ask spreads.

Options will depreciate the quickest right before expiration, so you might stumble across some opportunities at that time.

Some might disagree, but in my opinion, trading futures and equities would provide you a more liquid, faster moving market for daytrading than options.

Regards,
Steve
http://www.options-trading-resources.com/EliteTrSig

Option trading information and tools the pros wish they had! A former Chicago Mercantile Exchange employee reviews stock option trading software, books, and web sites and online income opportunity.
 
Daytrading options is a losing situation for us retails. For one, I've tried. But anyways, unless you plan on buying deep ITMs with deltas of 100 ( or 1 depending on viewpoint), the option just won't move enough.
 
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