Has anyone here had success, or know anyone who's had success, scalping at the money SPY options intraday? I'm talking down to as short a time frame as just a few minutes? I've been paper trading this strategy with real time data of the SPX using basic trendline analysis and technical indicators, and waiting for high probability setups like oversold stochastics bounces off established lower trend lines etc, or breakouts from triangles. A small moves in one direction in a few minutes can be a 10% move in at the money options, either direction, and with lower commissions from brokers like Optionshouse, it looks like it could be a viable income strategy. Crude, time consuming, and all day monitor watching for sure, but that is how I trade! Anyway, my thought is the SPY options market is the largest options market volume wise by far so it has tight bid ask spreads and hopefully enough volume to get market orders filled quickly. As with any paper trading strategy, many times, they don't quite work out very well in the real market. What are your thoughts for anyone who regularly trades options? Thanks for any info and help!
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Scalping SPY options
- Thread starter Werd
- Start date
My guess is the Bid ask spread would kill you...
Quote from Werd:
Has anyone here had success, or know anyone who's had success, scalping at the money SPY options intraday? I'm talking down to as short a time frame as just a few minutes? I've been paper trading this strategy with real time data of the SPX using basic trendline analysis and technical indicators, and waiting for high probability setups like oversold stochastics bounces off established lower trend lines etc, or breakouts from triangles. A small moves in one direction in a few minutes can be a 10% move in at the money options, either direction, and with lower commissions from brokers like Optionshouse, it looks like it could be a viable income strategy. Crude, time consuming, and all day monitor watching for sure, but that is how I trade! Anyway, my thought is the SPY options market is the largest options market volume wise by far so it has tight bid ask spreads and hopefully enough volume to get market orders filled quickly. As with any paper trading strategy, many times, they don't quite work out very well in the real market. What are your thoughts for anyone who regularly trades options? Thanks for any info and help!
From what you are trying to do, i.e. make money off of short-term directional moves, you are probably better off with futures because then you don't have to deal with the Greeks. That said, if your timeframe is short enough, the Greeks won't matter that much to your results anyway.
Also, come tax reporting time, you will appreciate the fact that with futures, all you have is one line of net profit/loss to report to the IRS, but with SPY options, you might have hundreds of transactions to report. I've been in both situations and the futures are much easier.
Quote from actionzip54:
My guess is the Bid ask spread would kill you...
With SPYs though, it's as tight as any other liquid market, especially as you get closer to expirations week as people with losing positions try and liquidate their losses. Just today, there has already been over 118,000 at the money calls traded on the 147 strike. Today, there was a perfect bounce setup at noon on the SPY. Massively oversold intraday and riding a lower trendline. It bounced, and the September 147 call went from a buck to a buck 20 in 15 minutes. With 40 contracts at Optionshouse, a round turn in a trade like that is still less than 30 dollars and it's a net profit of $770. Setups like that happen all day long. I guess I'll just have to try it and see if I can get filled quickly enough.
I have tried ES minis and had some success, but I've also been steamrolled over, especially during amateur hours when people are trying to scalp out a tick here and there. Heck, earlier this week I was up at midnight and had a good trade going and it moved against me by 2 dollars in one tick. Stop didn't fill. That's happened to me a few times. Maybe I'm doing something wrong there.
Quote from actionzip54:
My guess is the Bid ask spread would kill you...
With SPYs though, it's as tight as any other liquid market, especially as you get closer to expirations week as people with losing positions try and liquidate their losses. Just today, there has already been over 118,000 at the money calls traded on the 147 strike. Today, there was a perfect bounce setup at noon on the SPY. Massively oversold intraday and riding a lower trendline. It bounced, and the September 147 call went from a buck to a buck 20 in 15 minutes. With 40 contracts at Optionshouse, a round turn in a trade like that is still less than 30 dollars and it's a net profit of $770. Setups like that happen all day long. I guess I'll just have to try it and see if I can get filled quickly enough.
I have tried ES minis and had some success, but I've also been steamrolled over, especially during amateur hours when people are trying to scalp out a tick here and there. Heck, earlier this week I was up at midnight and had a good trade going and it moved against me by 2 dollars in one tick. Stop didn't fill. That's happened to me a few times. Maybe I'm doing something wrong there.
Quote from Werd:
I have tried ES minis and had some success, but I've also been steamrolled over, especially during amateur hours when people are trying to scalp out a tick here and there. Heck, earlier this week I was up at midnight and had a good trade going and it moved against me by 2 dollars in one tick. Stop didn't fill. That's happened to me a few times. Maybe I'm doing something wrong there.
If you were trading SPY options at that same time, you'd have been "steamrolled" in them too. Ultimately the correlation between liquid SPY options and ES futures is 1.
And you want to talk about slippage or non-fills, the SPY options, if you are holding overnight, are impossible to get out of after the options markets close. At least with futures, if you need to get out of a position at midnight, you can. If you are in SPY options at midnight and need to get out, good luck trying to get any sleep that night while you watch what the futures do, so you can estimate how screwed your option positions will be in the morning.
i'm sure you can accomplish anything if you believe you can... but this is more volatility trading then it is directional.... i trade this way in Apple options and it can be a good strategy... but you have to realize everything about the nature of options at expiration... your basically looking to go long gamma... your looking to get more and more deltas.... like these guys doing large Iron condor accounts weeks to a month or two away from expiration because its very hard to manage the changes in gamma as expiration closes in... your buying time and volatility.... options sometimes increase in value with very little movement in the underlying... and sometimes they don't move at all with decent moves in the underlying... theres more to model with trading options period... you do realize that sometimes the options start to move before the underlying does.. and in that case you can be behind the curve... you can buy a call... thats already priced in a move....
i got into options because of my frustrations with calling direction.. i've learned a ton.. but you then face the frustration of forcasting volatility and a set of other assumptions all together... like today... i bought weekly options on aapl that were expiring today for .18 sold them for .45 and the option never went into the money and the option actually expired worthless.
i got into options because of my frustrations with calling direction.. i've learned a ton.. but you then face the frustration of forcasting volatility and a set of other assumptions all together... like today... i bought weekly options on aapl that were expiring today for .18 sold them for .45 and the option never went into the money and the option actually expired worthless.
It would seem from what I read that everyone who is doing what you want to do with options (scalp indexes intra-day) does it with futures instead.
There's probably a reason for that.
I do it with futures.
I would never think of doing it with options.
There's probably a reason for that.
I do it with futures.
I would never think of doing it with options.
Yes Werd, I know people who day trade the SPY with huge success. And i am following them currently. You can use a top down approach to assess where the current price was, is now and have a potential to go next. Then you trade calls and puts using the smaller time frame. One can make any way from 20% to 1500% daily. I use the market cycle from a top down approach and trade off the 1 minute chart daily. You have to buy near the money puts or calls with the closest expiration date. No overnight position - only on special circumstance. Market cycle have 4 phase - you only trade the phase 2 and 4. Phase 1 and 3 are side ways. I am having good success so far (Only been a week using this system). Had 3 trades with over 20% success. I am hoping to step it up as of Monday - tomorrow. Good luck everyone.