options strategy.. pls help me to improve

[mushinseeker]

ironchef is correct. Options prob not the optimal way to daytrade tickers. IF YOU MUST, your best bet is to do an ATM vertical where both legs straddle the current price. It is most likely the most liquid, and the least exposed to the other greeks (theta,gamma, vega)- the closest delta play you can have. That means however, that you can't count on theta to enhance your return.BUT since theta is not an issue as much, this means you can avoid the entry on thursday , exit on friday thingy...

 

[kyliebrow786]

In options trading you just need to learn how to take advantage of the flexibility and full power of options as a trading vehicle. So, it’s essential to get a solid foundation to be certain you understand how options work and how they can help you achieve your goals in trading. Here is an article by my trading mentor, which might help you with other options trading strategies, if you want to try.
https://steadyoptions.com/articles/top-10-options-trading-strategies-r144/

I'm working on a new options strategy, I need folks to improve my odds.

-picking few potential volatile stocks before market opens (using stocktwits trending stocks, CNBC pre-market news, DOW Index upgrades) and go with the one above 20 SMA daily
-no complicated option legs, no spreads. only one way put or call
-Only first one hour of the morning enter and exit strategy
-no profit target, only timing based performance. Enter at 9:33 or 9:35 and exit by 10:27 am.
-3 times a week, my acct below 25k. no carry over, close position same day
-avoid trading on fridays, triple witching, 4 trading day weeks
-No ETFs at all means. I don't want to trade ETF options since %70 of the time they chop and end up eating your delta.
no stock under 40 $ a share

What you folks think? I'm looking positive helpful inputs

thanks

 

[BarbaraJ]

No single trading strategy is perfect and no strategy will work all the time. To paraphrase a famous quote, "it's not the strategy that matters, it's how you use it".

 

[spindr0]

As Ironchef suggested, "Day trading the underlying is hard enough, day trading options is even harder."

As Vanzandt suggested, "In the first hour or so on the volatile stocks of the day the bid ask spread is going to be quite large... and ... your price to get in and get out of the show will eat up your account."

If your system has any merit, trade the stock. Overcoming the option spread and reduced delta requires more accuracy and a larger move in order to be profitable.

 

[ironchef]

As Ironchef suggested, "Day trading the underlying is hard enough, day trading options is even harder."

As Vanzandt suggested, "In the first hour or so on the volatile stocks of the day the bid ask spread is going to be quite large... and ... your price to get in and get out of the show will eat up your account."

If your system has any merit, trade the stock. Overcoming the option spread and reduced delta requires more accuracy and a larger move in order to be profitable.

I agree with vanzandt and spindr0, if you "have to get out of a trade", first hour is a very tough place to be.

As for day trading options, there is a counter point posted by MrScalper not long ago, he said the same price action chart should be used to trade so a good day trader could do well day trading options? After some experimenting recently I think his point has merit.

I welcome any comments.

 

[ajacobson]

Yes, it will be tough. Implied volatility will be as important if not more important than price change. Make sure you have a robust tool to analyze the implied volatility of the strike(s) your trading.

 

[ironchef]

Yes, it will be tough. Implied volatility will be as important if not more important than price change. Make sure you have a robust tool to analyze the implied volatility of the strike(s) your trading.

Yes, I thought so too but when I tracked the IV of the options I owned, often they did not change that much on a very short time scale (like a few min) so to day trade options on a short time scale maybe I only have to deal with price change?

I welcome your comments.

Regards,

 

[ajacobson]

"Yes, I thought so too but when I tracked the IV of the options I owned, often they did not change that much on a very short time scale (like a few min) so to day trade options on a short time scale maybe I only have to deal with price change?"

No ! Events will be accompanied by IV changes.

 

[jimmyjazz]

I daytrade a specific ETF and typically wait until a couple of hours after the open to jump in. I mostly trade long ATM calls. My entry timing is set up by simple TA but I look at price action (holding at support, clearing resistance, etc.) to enter.

My biggest problem is usually too much position size. Once that thing is moving against you, it's hard to bail. Too much delta = big loss. Smaller position size makes it easier to ride a trend when you're right, often with a trailing stop.

 

[ironchef]

I daytrade a specific ETF and typically wait until a couple of hours after the open to jump in. I mostly trade long ATM calls. My entry timing is set up by simple TA but I look at price action (holding at support, clearing resistance, etc.) to enter.

My biggest problem is usually too much position size. Once that thing is moving against you, it's hard to bail. Too much delta = big loss. Smaller position size makes it easier to ride a trend when you're right, often with a trailing stop.

Appreciate your comments. I think having a tight bid/ask spread and lots of volume are important to day trading options.

Regards,