Not a bad way to swing with options

If you put a gun to my head and forced me to do it, I'd go with ATM options on the most liquid market I could find -- probably front month ES futures. But it still looks like a losing play to me.
 
@qlai,

Back to your OP, in principle, you are correct, in practice it is a lot harder than swing trading the underlying since you now have the direction, the timing, the uncertainty of IV, the nonlinear effects... :banghead:

Like @Wheezooo said, I would be out of business a long time ago if I traded microstructures.
 
@ironchef, thank you for your input ... Much appreciated. Forgive my ignorance, but what does "microstructures" mean? I've heard this term from other members here as well.

You mentioned that you like the convexity of options. I looked it up and found below "unofficial" definition. Is that what you meant?

So now in terms of options, convexity is also known as gamma, it will probably be easier to talk about gamma instead of using a confusing word like convexity(gamma is the convexity of options).

ironchef said:
Like @Wheezooo said, I would be out of business a long time ago if I traded microstructures.
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Yeah, he sounds like a no-nonsense kind of guy, but his message is to not even try. This is hard to accept :)
 
qlai said:
@ironchef, thank you for your input ... Much appreciated. Forgive my ignorance, but what does "microstructures" mean? I've heard this term from other members here as well.

You mentioned that you like the convexity of options. I looked it up and found below "unofficial" definition. Is that what you meant?

So now in terms of options, convexity is also known as gamma, it will probably be easier to talk about gamma instead of using a confusing word like convexity(gamma is the convexity of options).


Yeah, he sounds like a no-nonsense kind of guy, but his message is to not even try. This is hard to accept :)
More...
I don't know other's definition, for me microstructures are what you described, trying to trade intraday/daily ups and downs, I agree with @Wheezooo, not tradable (I have been unable to find a profitable way to trade it). The major bull trend since 2009 was tradable. Of course the devil is in the details.

Convexity (I learned it from reading @Maverick74's posts) means long option payouts are nonlinear.

Best wishes.
 
antares66 said:
You are right and it is very difficult to assess if buying a put were the right decision at this time. Which kind of options (OTM,ATM, ITM) with which expiration would you prefer for swing trading?
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Moneyness:
The nearest OTM option or slight ATM option.
Reason being cheaper premium as theta is the only component that i am paying for.

Maturity:
I do directional trade based on a few technical set up.
Based on my past records, my strategies work well within 1 month, so the maturity i look at is always around 30days. And also for a more obvious reason, the shorter the cheaper.

Yourself?
 
qlai said:
@ironchef, thank you for your input ... Much appreciated. Forgive my ignorance, but what does "microstructures" mean? I've heard this term from other members here as well.

You mentioned that you like the convexity of options. I looked it up and found below "unofficial" definition. Is that what you meant?

So now in terms of options, convexity is also known as gamma, it will probably be easier to talk about gamma instead of using a confusing word like convexity(gamma is the convexity of options).


Yeah, he sounds like a no-nonsense kind of guy, but his message is to not even try. This is hard to accept :)
More...

1- Convexity is really a term related to bonds. Also with one letter changed it is the name of one of my main accounts in League of Legends.

2- Let me bother you more. I will go so far as to say that if you are attempting to use options for scalping inside or outside of daily channels, that if you are playing from the short side, expect that your volatility will at best match the volatility for the days range. You will do everything wrong at every moment and all your hedges attempting to control negative gamma will suck. On a super choppy, high vol day, you will rip yourself to pieces.

Now if you are playing from the long side, I promise you that at absolute best you will match close to close vol, which is much lower than range vol. You will miss the tops, miss the bottoms, hedge to often when the market breaks out, and you will be lucky to match the results of if you just did nothing and hedged at the end of every day at the close.

Options teaches you faster than any other product the reality of how insignificant you are relative to the market. That you can never be totally right, and on the rare days I was, it looked like this...

https://www.youtube.com/watch?v=9k5N4KrZ0pw

I show up at 2:15 in the video :-)
 
qlai said:
I don't know, if I trade directionally, I don't think I trade against MM ... They just pair me up with some other idiot(or hedger) and take their cut no matter what.

I don't get it, let's assume there are people who have an edge doing short term (up to 3 months) directional trading ... Why can't they use options to help them better structure/execute their strategy? Many people make money simply on noise (Overreactions that have no fundamental significance) and options seem to be very good at noise exaggeration.
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