Making money with calls/puts

J

JML845

I've read some threads here at ET about options, but most of them are about complicated strategies or selling. Is there anyone out there that just buys calls when they are bullish and puts when bearish? Anyone who swing-trades with options? Is this a reasonable strategy?
 
Although I tend to prefer futures, when I do trade options I normally just take an outright long put/call position. I've had better luck with "in the money" strikes as opposed to "out of the money" strikes.
 
Buy in the money options and treat it like a stock trade. It kills me to watch it because of how slow the movement is, so I just put the trade on and move onto other things. Great for 20-30 percent on your investment when you're right but don't put too much money into it because (since I suck at picking stocks) it goes against me alot and I end up making alot less than that after commisions and outright losses.
Also, gotta pick up the options that have enough volume to get in and out.
Go to cboe.com and print out the list of highest volume options, make out a watchlist of those stocks and, voila, a readymade list of candidates.
Albert
 
I have a seperate account for options trading and I usually stick to DIA/QQQ options. I buy outright ATM or slightly OTM calls/puts and shoot for about 50% return (I'm talking front month here) in a 2-3 day period, after I dump the position. The key here is to only use a small portion of your account for each play, I'd say between 5-10% on a smaller account (under 20k) and on a bigger account I'd say 2-5% per position. Look to trade on exhaustion moves or on a trend continuation if you're feelin' good, for example

5/10/04
I buy QQQ 35C at the close, sold the next day at the close

5/13/04
I buy SMH 37P at the close, sold the next day mid-day

Took nice profits on both and pushed my account up 20% for the week
 
There are a couple of issue in the directional trading of just going long an option. First, you have to time the market correctly on direction and amount of movement. Second, you risk too much with this strategy as opposed to doing a spread.

However, with those two things said I do like the startegy on the OEX. I try to stay within 10pts of the strike and sell when I reach my target.
 
Quote from JML845:

I've read some threads here at ET about options, but most of them are about complicated strategies or selling. Is there anyone out there that just buys calls when they are bullish and puts when bearish?


Anyone who swing-trades with options? Is this a reasonable

strategy?
More...

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JML 845;

First question;
no , no because to make a long complex answer easy to understand
you would have to profit more than king size bid /ask
& have to BE RIGHT on timing & direction before
decay in May
or any month .

Picture option time decay as an ice cube melting
in Arizona summer sunshine.

Second question;
yes,yes on swing trading perhaps ,but only if you know how to profitably trade /invest stocks
but even then leave daytrading options to the market makers.

Also like the Sheldon Natenberg option strategy;
moderately bullish or bearish;
buy/sell underlying stock.[no options bought or sold there]


Wisdom is the principle thing.
Solomon,trader king
:cool:
 
Quote from murray t turtle:

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

JML 845;

First question;
no , no because to make a long complex answer easy to understand
you would have to profit more than king size bid /ask
& have to BE RIGHT on timing & direction before
decay in May
or any month .

Picture option time decay as an ice cube melting
in Arizona summer sunshine.

Second question;
yes,yes on swing trading perhaps ,but only if you know how to profitably trade /invest stocks
but even then leave daytrading options to the market makers.

Also like the Sheldon Natenberg option strategy;
moderately bullish or bearish;
buy/sell underlying stock.[no options bought or sold there]


Wisdom is the principle thing.
Solomon,trader king
:cool:
More...

Selling options have a definite edge, especially if you at least try to split the spread when you are selling. You have to hedge yourself by setting a stop either in the options itself or in the underlying for an imperfect hedge. This is one of the best strategy because it captures the fat premium that buyers pay just to gamble. If you know how to read market swings and time your sale, your chances increase tremendously. And Taleb's assumption that you will eventually blow out because of black swan event applies ONLY if you do not know how to hedge.
 
Quote from LoosenUp:

Selling options have a definite edge, especially if you at least try to split the spread when you are selling. You have to hedge yourself by setting a stop either in the options itself or in the underlying for an imperfect hedge. This is one of the best strategy because it captures the fat premium that buyers pay just to gamble. If you know how to read market swings and time your sale, your chances increase tremendously. And Taleb's assumption that you will eventually blow out because of black swan event applies ONLY if you do not know how to hedge.
More...

try to hedge a 9/11 overnight :)

maybe its more safe to do this with options on globex futs that trade outside 9:30-4 :)

Tiki
 
Quote from LoosenUp:

Selling options have a definite edge, especially if you at least try to split the spread when you are selling. You have to hedge yourself by setting a stop either in the options itself or in the underlying for an imperfect hedge. This is one of the best strategy because it captures the fat premium that buyers pay just to gamble. If you know how to read market swings and time your sale, your chances increase tremendously. And Taleb's assumption that you will eventually blow out because of black swan event applies ONLY if you do not know how to hedge.
More...

Agreed. The other false assumption that many people make is that naked sellers will sit on their hands until expiry. Having a plan for nearly all the possible scenarios is key. A hedge from the start is best. With all the new products rolled out over the past few years, there are a good number of "imperfect" hedges available on the cheap for broad based indexes.
 
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