Options Daytrading?

Learn to daytrade stocks first.

Options are harder than the underlying (subjective opinion of mine, but I'm right), especially in a timeframe where the slippage is a large percentage of what you can expect to make (objective and indesputable... and yes one can add liquidity but my point isn't that options can't be daytraded, just that it's a more difficult task to learn than trying to trade stocks themselves, except for peope who have many years of options and/or trading experience).
 
Quote from FXTraderWill:


Options are harder than the underlying (subjective opinion of mine, but I'm right),
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LOL :p

I agree with your post.

Are options harder to daytrade than stocks/futures? YES, but not for the reasons people were citing.

Can you potentially make more money daytrading options than the underlying? YES.

If an options daytrade was profitable, would a trade in the underlying have been profitable too? Almost always YES.

If a futures daytrade was profitable, would a trade in the underlying have been profitable too? A BIG MAYBE, and this is the issue.
 
Quote from Cache Landing:

LOL :p

I agree with your post.

Are options harder to daytrade than stocks/futures? YES, but not for the reasons people were citing.

Can you potentially make more money daytrading options than the underlying? YES.

If an options daytrade was profitable, would a trade in the underlying have been profitable too? Almost always YES.

If a futures daytrade was profitable, would a trade in the underlying have been profitable too? A BIG MAYBE, and this is the issue.
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But if you can go to a prop firm and get 10 to 20:1 leverage, extremely few options will give that kind of bang. That's why it's a lot smarter to use options for swing trading than day trading. Because at the end, it about the moves and volatility (in any form you wish to view it).
 
Day trading without blowing your account requires tight and/or meaningful automatic stops. With options, it is practically impossible to set tight stop of even 5-10% without hitting the stop before your target.

I have tried day trading the SPX options and had to deal with poor fills and had to manage stop/losses manually which can be very stressful.

Also, to do meaningful day trading (again without blowing up your account), you need to follow charts, support/resistance,
etc. It would be difficult to place stops on your options looking at the support/resistance of the underlying.
 
Quote from iloveoptions:

But if you can go to a prop firm and get 10 to 20:1 leverage, extremely few options will give that kind of bang. That's why it's a lot smarter to use options for swing trading than day trading. Because at the end, it about the moves and volatility (in any form you wish to view it).
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You need to be careful about what you're saying. Leverage and gearing are two different things. Leverage as you state it is inherently more risky than utilizing gearing for enhanced return.

Also, the ATM NDX options I was referring to provides the equivalent of 15:1 leverage if trading the underlying. If you're willing to trade the 35 delta options instead, they are equivalent to 20:1 leverage.

As I stated before. Utilizing 15:1 leverage is more risky than utilizing a geared option with equivalent gains potential. I think this is one of the great myths in the trading world, so I'd better provide an example.
Buy 4 NQ @ 2037 today.
Buying power used = $13,000
Leverage ~ 13:1
5-point gain = $400 profit
ROI = 3.1%
Is margin call possible =YES
Possible to lose more than initial investment = YES

Buy 100 shares NDX @ 2030
Leverage = 15:1
Buying Power used = $13,533
5-pont gain = $500
ROI = 3.7%
Is margin call possible = YES
Possible to lose more than initial investment = YES

Buy 2 NDX 2050 calls @ $63.00
Leverage equivalent ~ 16:1
Buying power used = $12,600
5-point NDX gain ~ $500 profit
ROI = 4%
Is margin call possible = NO
Possible to lose more than initial investment = NO
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As the numbers show, the calls outperform on a 5-point move. The option position does even better than the underlying positions on large moves higher as gamma effects kick in and the delta increases.

Also, the protective effects of long calls becomes greater when you consider the outcome of a 9/11 type event. With both the futures and the stock, your initial investment is completely wiped out with about a 150-point drop. But again, with the long calls, you benefit from gamma, decreased delta, and increasing volatility, causing you to lose money slower. If there was a 150-point drop in NDX right now, your ATM long calls would likely only lose about 60% of their value. That's pretty good when compared to 100% or more with the underlying leveraged 15:1.
 
Quote from higherhigh:


I have tried day trading the SPX options and had to deal with poor fills and had to manage stop/losses manually which can be very stressful.
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NDX options are much better for daytrading than SPX options.
 
Quote from optioncoach:

Avg future trading firm will give you $1,000 intraday margins or les so 4 NQ should be really $4k intraday margin used.
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I was going off requirements on TOS platform. That's not really the point anyway. For equivalent risk the better margin requirements don't increase returns. Utilizing the better margin requirements would require the assumption of greater risk.
 
Well since you are comparing leverage and ROI, just want to equalize it out.

My main point is that it certainly can be done but but futures are the better product for daytrading the indexes.

And I also agree that SPX is not the index to daytrade. Spreads are horrible. NDX is very reasonable.
 
Quote from optioncoach:

Well since you are comparing leverage and ROI, just want to equalize it out.

My main point is that it certainly can be done but but futures are the better product for daytrading the indexes.

And I also agree that SPX is not the index to daytrade. Spreads are horrible. NDX is very reasonable.
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Good point. I should have specified that ROI was based on risk. Technically, the positions I used above would have very similar max loss, assuming one could exit the position at 100% loss.

I also agree with your point that daytrading NQ and ES is easier, but people seem intent on making untrue statements that aren't supported by the facts.
 
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