Quote from demoship:
I've never heard of an options daytrader. The spreads and commissions on them make it practically impossible..
I daytrade options. All the caveats you mentioned are true. And I can add that, when you're buying because of a big intraday move in the underlying with the expectation that it will reverse, the reversal will collapse the IV and you may find the option doesn't increase in value
at all even if the underlying moves by a few percent.
All that being said, daytrading long options can be worth it, I believe, in certain cases. I trade stocks and futures, but will trade options intraday or for an overnight hold in specific cases where I want the leverage or want to limit my loss.
I daytrade options in OIH because the underlying is just too expensive. Yes, this means that a 50-cent movement will only get me 20 cents, but that means I make $200 on an outlay of $3.5K instead of $60K.
I daytraded JTX options yesterday and today. When a stock is moving down 10%-20% intraday and I don't expect any news release from the company until after hours, the position may need to be held overnight to take advantage of an expected gap up in the morning, but I don't want to risk even $10K on an overnight hold like this. I made one options daytrade following it up yesterday afternoon on its initial reversal. After that it went down again, and I bought $2800 in May options near the close, all of which were sold over a few hours this morning after the gap up. But if the stock hadn't recovered today, these options are good for another 6 weeks, with an IV of around 50 and a theta of 2 cents, so I could hold onto them for a few days if I wanted to.
In general, with risky stocks I'll only trade their options rather than the underlying, to limit my potential loss. One time I violated my own rules and daytraded RFX stock because of the activity it was getting premarket. I bought around $7K worth... and then it was halted, and when it reopened the next week it gapped down 99%.
