Reaching midpoint

sle said:
PS. I will venture that you are trading options in such a hurry that you would rather always take the displayed market, you would be better of trading the underlying
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No options. Trading momentum pockets in mid-large cap stocks, primarily around news/high volatility cycles.

As an experiment, I recently morphed my pricing model, and algo, to backtest trades (big caps) that enter at start of month and exit (OCO) based on multivariable R:R levels, or time stop at last trading day of month. Basically a swing model. I’m using the same tick data that I use for my intraday systems.

One variation (6 month backtest) looks promising, but I can’t tolerate holding overnight portfolios of equities. I’m somewhat versed in options theoretically, but wouldn’t know how to apply them toward the positive expectancy. The model seems to capture profits at tail extremes efficiently. I was thinking, some form of a net long ATM option might produce a decent ROI with good exposure. A method of transferring the underlying entry/exit signals/size into what option/spreads contracts to buy would need to be implemented. No time, but a pinch of motivation to pursue this :)
 
digitalnomad said:
No options. Trading momentum pockets in mid-large cap stocks, primarily around news/high volatility cycles.

As an experiment, I recently morphed my pricing model, and algo, to backtest trades (big caps) that enter at start of month and exit (OCO) based on multivariable R:R levels, or time stop at last trading day of month. Basically a swing model. I’m using the same tick data that I use for my intraday systems.

One variation (6 month backtest) looks promising, but I can’t tolerate holding overnight portfolios of equities. I’m somewhat versed in options theoretically, but wouldn’t know how to apply them toward the positive expectancy. The model seems to capture profits at tail extremes efficiently. I was thinking, some form of a net long ATM option might produce a decent ROI with good exposure. A method of transferring the underlying entry/exit signals/size into what option/spreads contracts to buy would need to be implemented. No time, but a pinch of motivation to pursue this :)
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I use a ATM net log option model for swing trading. But, I usually enter near close and hold overnight. As far as I've observed, an intraday system with even the most liquid options would be tough to gain a positive expectancy (I'm talking from the perspective of a RETAIL trader). But I would be interested in hearing your results/opinions if you do pursue it. Thanks
 
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Maybe you misread, but I meant a variation of my intraday system to swing trade options. I’d never trade options intraday, especially on stocks. It’s hard enough to generate alpha (after slippage/commission) on the underlying.
 
Help me out here: say as a retail trader I submit an order to buy at the midpoint of a $1.00/$1.10 option ($1.05). Is it fair to assume when my order fills the spread is probably closer to $0.95/$1.05 ??? I get filled on buys at or near the "midpoint" fairly often but I suspect those fills are pretty close to the ask.
 
jimmyjazz said:
Help me out here: say as a retail trader I submit an order to buy at the midpoint of a $1.00/$1.10 option ($1.05). Is it fair to assume when my order fills the spread is probably closer to $0.95/$1.05 ??? I get filled on buys at or near the "midpoint" fairly often but I suspect those fills are pretty close to the ask.
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I think the collective answer here is, "watch."
Watch before the trade; watch upon transmitting the order; watch during and afterwards.
All that watching won't guarantee an answer (witness the divergence of experience, trading, and opinion right here!), but it will inform.
 
Well, sure . . . but I'm not planning any trades any time soon. Just looking for confirmation or refutation of my hunch. The B/A spread has never been a big headwind to my trading, as I am typically looking at longer term holds with (relatively) large swings.
 
I do put credit spreads on RUT and try to buy/sell on the mid using limit orders. Sometimes I'll get an immediate fill and other times it will sit there. I'll examine 'market depth' and see what the recent activity has been. After 5-10 minutes of waiting, I'll give up a nickel or so and that will often get it filled. But if the market is moving against the order, I may have to give up more. On rare occasion, I'll get filled at a better price than the limit price. I use 'best' for the exchange.
 
What do you think about bidding/offering at the theoretical option price (assuming its within bid/ask)? Let's say I want to automate my orders, wouldn't theoretical price give me a good real-time benchmark for "fairness?" Let's assume whatever model I use is close enough for my purse.
 
I'm afraid that idea might work in theory but not in practice and you wouldn't get filled. I'd say the bid/ask/mid are reality and what we must work with. But, you could always do an experiment with 1 contract and see how it works out.
 
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