Tell us again why you want to day trade options instead of the underlying and deal with simultaneous underlying price change, volatility change and time decay....? You must be an options pro.
Stop Loss on Options
- Thread starter sjain100
- Start date
I do understand that, but my question would be why? If you are watching the underlying, then just trade the underlying and place a stop. Why would someone want trade both sides of option spread in one day?
Certainly can----
Not having stops on options is ludicrous! This is my 20th year trading options and I have used stops since the beginning.
Must meet these requirements to use stops:
1: High Daily Volume (thousands of contracts per strike daily) options.
2: Tight Bid/Ask Spread (.01 to .02)
3: ATM or slightly ITM with at least 2-4 weeks left B/4 expiration.
4: Maximum hold time of 4 days.
5: A minimum -.40 to -.50 Stop below the entry.
6: A profitable Sell Limit of +.40 to +.50
Very few trade vehicles meet those requirements. The best one that does is the SPY.
Look up my older thread called, Purely Mechanical Option Trading Part 2. You will see live calls
using a Buy Limit, Sell Limit, & Stop combined into an IB semi-automated Bracket Order.
Must meet these requirements to use stops:
1: High Daily Volume (thousands of contracts per strike daily) options.
2: Tight Bid/Ask Spread (.01 to .02)
3: ATM or slightly ITM with at least 2-4 weeks left B/4 expiration.
4: Maximum hold time of 4 days.
5: A minimum -.40 to -.50 Stop below the entry.
6: A profitable Sell Limit of +.40 to +.50
Very few trade vehicles meet those requirements. The best one that does is the SPY.
Look up my older thread called, Purely Mechanical Option Trading Part 2. You will see live calls
using a Buy Limit, Sell Limit, & Stop combined into an IB semi-automated Bracket Order.
What purpose would there be to intraday trade options?
A very small group of option traders trade mathematical mechanical systems based on a math formula that gives option direction (call or put) daily.
These systems call for pre-determined Buy Limit, Sell Limit and Stop, usually combined into a semi-automated I.B. Bracket Order. Many times the trade will either trigger the Sell Limit or trigger the Stop, ending the trade in the same day.
I demonstrated one of these systems with live calls including the daily bracket orders on an older ET thread I had called, Purely Mechanical Option Trading Part 2.
These systems call for pre-determined Buy Limit, Sell Limit and Stop, usually combined into a semi-automated I.B. Bracket Order. Many times the trade will either trigger the Sell Limit or trigger the Stop, ending the trade in the same day.
I demonstrated one of these systems with live calls including the daily bracket orders on an older ET thread I had called, Purely Mechanical Option Trading Part 2.
I swing trade options with similar criteria as you. But if you are mostly using the SPY why not use futures ? You are not picking up a lot of convexity with the option in this type of trade, are you ?
Just use futures intraday. There seems to be no reason to trade options intraday.
I agree with you if you are a mom and pop retail like me. If you are a pro trader, it is perhaps a different story since you have resources to analyze a complex strategy?
I am eagerly waiting for OP's answer.
Thank you. I am going to look into this. Currently, none of my option positions fit any of the 6 requirements.
