Should i look in to options instead of stocks?

M

McTrading

I have developed a stock trading strategy (short term, from at least 24 hours up to a max a few weeks) that gives me on average a 1:1,4 risk reward, win rate of around 65% with a very good expectancy.

However to trade my strategy in stocks i need at least $100K, which i do not have. So i am wondering if options would be a good alternative, but so far i understand nothing about options so that is why i am asking this question here.

The strategy manages to predict if the market goes up from the next day or maximum in a week or 2. I understand timing is important with futures, so that is a check.

However i also understand that if the stock goes nowhere you do not lose your money, if the options go nowhere you do.

A few examples of trades i recently had, both positive and negative.

Short WEN september 9th
Long XRAY september 20th
Shorts VIPS september 23th
Short KGC september 25th
Short EXC september 30th
Long OKTA october 1th
Short TD october 1th
Long AA october 11th

Of course not all are winners, here are some of the recent losers

Short ADT september 26th
Long MA october 4th
Long PCG october 4th

However on average i do mange to correctly time and predict a move of at least a few % in a stock. I think the leverage op stock options could help me make much more money with a smaller deposit. However again, i do know nothing about options so i would like to get some opinions before i start wasting my time learning options, if it wouldn't fit my strategy.
 
See if your system works off of a 1 or 5 min NQ / YM or RTY e-mini futures contract or the CL (crude futures). You'll probably get several signals during the first 2.5 hours of morning trading. You get to take 60% long-term capital gains on the profits and it's a one-liner on your tax form to account for ALL of your trades for the year.

Best of all, you keep your market exposure risk small, no overnight risk. Easy on the nerves.
 
SteveH said:
See if your system works off of a 1 or 5 min NQ / YM or RTY e-mini futures contract or the CL (crude futures). You'll probably get several signals during the first 2.5 hours of morning trading. You get to take 60% long-term capital gains on the profits and it's a one-liner on your tax form to account for ALL of your trades for the year.

Best of all, you keep your market exposure risk small, no overnight risk. Easy on the nerves.
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It does kinda work on futures intraday, however i have noticed the returns are a lot less exciting as with stocks, especially if you take in account the hours of work i need to put in every day.

I developed this strategy so i would need to spend less time behind my desk, not more :D. I would only need to trade the close with this current strategy to hold positions in the next (few) trading days.

However i will take a look at the futures again with this strategy, maybe i have missed something.
 
It's hard to determine from the information provided if you would do better with options. Option spreads tend to be wider, premium decays over time and the delta is a factor. You can use high delta deep ITM options but their spreads get a bit nasty and an average gain of a percent or two might not be sufficient to overcome that.

I think that your best course of action would be to open a paper trading account and take the appropriate option positions when you get your signals. That's probably the easiest way to get a feel for your timing model.
 
Metamega said:
If it’s a simple long/short why do you need 100k?
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Margin. I need at least $200K of margin, otherwise i can not open a large amount of my trades, with portfolio margin it would be even better.

I am currently holding around 20 trades (demo), so i need some margin, my calculations showed $200K to be the ideal amount for the risk i am willing to take per trade.
 
spindr0 said:
I think that your best course of action would be to open a paper trading account and take the appropriate option positions when you get your signals. That's probably the easiest way to get a feel for your timing model.
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I am going to open a paper trading account somewhere next week. I still have a lot of reading to do first since my knowledge of options so far is zero.
 
With stocks you can simply buy one share if need be. With a broker like IB which charges a penny a share, you can scaled quite a bit down. If you rely on limit orders being visible on the book, your odd lots won’t be there but you’ll get filled.
 
The Decay is a bitch but also SL's are a bitch so it's tricky, likely turn more of those even though they went the right way into losers.

In the Money, check the Options prices, find a $55 stock approx and see how much the November 50 Calls are selling for, remember end of the month price $55 there worth $5, so if your paying $10 then it's got to get to $60+ to make a profit, flip side being gets to $70 then 100% or quick moves less decay but can't guarantee that. if it goes to $20 then you've still only lost your $1000 per contract.

INTC $52.23, Call 48 end Nov $4.75 only 50cents extra charge, not a very strong stock mind.

Remember SL gets hit, you've sold your out, Option goes to near zero given enough time and a news or SEC release it can get back to profitable.

Good sides and bad sides!!
 
McTrading said:
I have developed a stock trading strategy (short term, from at least 24 hours up to a max a few weeks) that gives me on average a 1:1,4 risk reward, win rate of around 65% with a very good expectancy.

............

However on average i do mange to correctly time and predict a move of at least a few % in a stock. I think the leverage op stock options could help me make much more money with a smaller deposit. However again, i do know nothing about options so i would like to get some opinions before i start wasting my time learning options, if it wouldn't fit my strategy.
More...


Well, the universe of option traders is divided to three groups (divisibility by 3 is almost universal... as you may know..) a) those who are 'purely lucky' ones; two days ago they bought, as a lottery ticket, the 1800 put option on AMZN (say..) and today they won big. b) those who are pretty good 'prophets' (they believe they are good in timing and predicting) and were certain few days ago that TSLA (say..) will go bust..and finally c) those who use the options to grind volatility day in and day out and at the end of the day they collect the nickels and dimes off the floor... My question to you, to which group you would want to belong?
 
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