Is option daytradable?

stinkyfelix · Feb 7, 2009

Quote from mizhael:

Does anybody know if actually there is any benefit to daytrade options? Given that options traditionally are slow investments, and daytrading cost a lot of energy...

You can easily make 10% or more on a single daytrade of SPY or QQQQ options.

If you can successfully trade SPY or QQQQ itself, then you might be ready to trade their options, otherwise forget it. You will just lose your capital at a faster rate.

You can actually lose money on a trade even it the price of the underlying goes in your favor, if you bought high IV and sold on low IV...

increasenow · Feb 7, 2009

since you do not have the $25K...you can use your cash in your account once per day to trade options...trade QQQQ options or SPY...best volume and can trade with like $1,000 or $2,000...only...

increasenow · Feb 7, 2009

Quote from stinkyfelix:

if you bought high IV and sold on low IV...

please explain more...what tells if low or high?do you mean how far in or out of the money?

mizhael · Feb 7, 2009

Quote from dagnyt:

If commissions are going to be a factor for you, that's not good.

Today, commissions are so low that you should be able to ignore them.

You can trade for 70 cents per contract. When I first started as a market maker, I had to pay $1.00 per contract, plus exchange fees. OK, that was 1977, but it's less expensive to be a customer today.

Mark

Wow great Mark! You have so many years of experience! //Admire

mizhael · Feb 7, 2009

Quote from stinkyfelix:

You can easily make 10% or more on a single daytrade of SPY or QQQQ options.

If you can successfully trade SPY or QQQQ itself, then you might be ready to trade their options, otherwise forget it. You will just lose your capital at a faster rate.

You can actually lose money on a trade even it the price of the underlying goes in your favor, if you bought high IV and sold on low IV...

I was wondering in terms of risk/return, which trading style (of course we are talking about option trading) is actually better, day trading, swing trading, or mid-long term?

mizhael · Feb 7, 2009

Quote from increasenow:

since you do not have the $25K...you can use your cash in your account once per day to trade options...trade QQQQ options or SPY...best volume and can trade with like $1,000 or $2,000...only...

Should be okay. I am qualified.

dmo · Feb 7, 2009

Quote from mizhael:

I was wondering in terms of risk/return, which trading style (of course we are talking about option trading) is actually better, day trading, swing trading, or mid-long term?

Every successful trader I've ever known has a very, very idiosyncratic trading style they've arrived at through trial and error. They know that style inside out, can't make money trading any other style - and nobody else can make money trading their style.

So at some point Mizhael - on your road to being a successful trader - you will have to shut out what everyone else says, take a hard look at the markets, and try to discover what YOU see, what makes sense to YOU, what correlations or patterns present themselves to YOU. That is how you will find success.

In the meantime it's fine to ask around what everyone else does. Just don't be deluded into thinking you will find "the answer" that way.

mizhael · Feb 7, 2009

Quote from dmo:

Every successful trader I've ever known has a very, very idiosyncratic trading style they've arrived at through trial and error. They know that style inside out, can't make money trading any other style - and nobody else can make money trading their style.

So at some point Mizhael - on your road to being a successful trader - you will have to shut out what everyone else says, take a hard look at the markets, and try to discover what YOU see, what makes sense to YOU, what correlations or patterns present themselves to YOU. That is how you will find success.

In the meantime it's fine to ask around what everyone else does. Just don't be deluded into thinking you will find "the answer" that way.

Your points are well-taken. Thank you!

I am at the stage of learning from other people and formulating my own style through trial and error.

Please come back to the (objective) risk/reward of the trading styles.

filter_sweep · Feb 7, 2009

My question would be, what advantage do you think you're getting daytrading the options versus daytrading the underlying? Generally speaking, you will pay higher commissions and deal with larger spreads, and then when you consider you're getting a lower delta and have to deal with volitility contraction (assuming you're long the options) that will bite you in unless your trade is long puts and the market goes down, it doesn't make much sense to me.

The only reason I can think of is if you are undercapitalized and want to increase your leverage, in which case you definately do not need to be daytrading options if you want to stay in the game long enough to learn it.

dagnyt · Feb 7, 2009

Quote from mizhael:

Does daytrading with option make sense?

Thanks!

Off topic, but you may want to consider learning more about the psychological aspects of trading.

You want to understand which habits are harmful and which are essential. It frightens me that you are so concerned with using maximum leverage - BEFORE - you have proven that you can trade profitably with NO leverage.

Take a look at the blog of Dr. Brett Steenbarger It should be very helpful:
http://traderfeed.blogspot.com/

Mark