Swing trading using options

[Pkay]

As another newbie, I wish things were that simple.

With underlying (stocks, etc.) all you need to do is guessing whether it is going up or down, if your guess is correct you make money. With options, you have to guess the up/down of the underlying, guess when the up/down will occur, guess if you are buying with expensive/cheap volatility, guess the correct strike price to buy/sell in order to make money. Your counter party is likely a professional, one who trade for a living. Think about that before you start.

If you are a true retail like me you do have advantages: You trade your own money so no one can pull the money at the most inappropriate moment; you can decide how, when and what to trade so on paper you can pick the best time and best condition to trade.

Welcome to ET.

Thanks for the welcome, really appreciate it!

Yes, I'll happily admit that I am a newbie so your view on the complexity of trading options resonates with me.

I think I'm attracted to options as I've seen 100 lot contracts on highly liquid equities going for less than $100. I suppose these are exactly the type that will more than likely expire worthless?

What instrument or market would you recommend that, with a small account of $2,000, I start trading?

Also, do you mind if I ask you what you trade?

Many thanks!

 

[Pkay]

You are looking at 2-3 years of study and experience before you can even begin to understand how complex an answer is to that simple post. Basically, you haven't lost your training wheels yet, but are asking why you can't drive an F1 around the track without crashing.

One good thing about this business is there is a ton of free stuff for you to use in starting your education. Free data, free charts, free backtesting platforms, free simulators.

You only learn by doing. So go do it.

Good luck.

Thanks lindq, I really appreciate your taking time out to educate a newbie like myself. It's much appreciated!

I gather from your replies that you would not advocate a beginner starting out with options. If not, then what would you recommend as a good market or instrument to start trading?

I did look at futures but, with only $2,000 to start with, cannot meet the overnight margins.

 

[lindq]

Thanks lindq, I really appreciate your taking time out to educate a newbie like myself. It's much appreciated!

I gather from your replies that you would not advocate a beginner starting out with options. If not, then what would you recommend as a good market or instrument to start trading?

I did look at futures but, with only $2,000 to start with, cannot meet the overnight margins.

You don't trade anything with 2K. And anyone who suggests otherwise is doing a disservice.

What you should do with your 2K is invest it in a good backtesting software package, and spend your time in simulation while you learn. There is a good reason why even the best F1 drivers in the world spend most of their time on a simulator. Same thing with trading.

Your questions on this site should be "how can I learn?" instead of "how should I trade?"

 

[Overnight]

...

What futures instrument would you recommend with just $2,000?

With that much money? MGC. That's about it if you want something with liquidity and movement. You could even swing a few contracts with it overnight and not have a heart attack in the morning.

Xela's advice to "swing futures with low capital" is bad advice, because she was very generic there.

 

[Overnight]

...

Your questions on this site should be "how can I learn?" instead of "how should I trade?"

This

 

[Pkay]

With that much money? MGC. That's about it if you want something with liquidity and movement. You could even swing a few contracts with it overnight and not have a heart attack in the morning.

Xela's advice to "swing futures with low capital" is bad advice, because she was very generic there.

Is this E Micro Gold? If so you're right as the maintenance margin is $340.

Thanks for the heads up. How liquid is this product? I've heard that the E Micro futures are generally desert lands in terms of trading liquidity.

How could I check the liquidity in MGC?

Thanks.

 

[Overnight]

Is this E Micro Gold? If so you're right as the maintenance margin is $340.

Thanks for the heads up. How liquid is this product? I've heard that the E Micro futures are generally desert lands in terms of trading liquidity.

How could I check the liquidity in MGC?

Thanks.

MGC is the only micro that I have seen that you can expect to have decent movement, because it exactly tracks the GC (which has decent movement), based on the nature of the contract. All it's specs are exactly the same as GC, just 1/10th the size.

But you have to remember. If yer down to trading MGC, you don't need a whole lot of liquidity, because you're trading for $1 per tick. If you can get really good at reading the GC movement, you will be able to profit on the MGC with your analysis , i.e. $2-3 per tick for a couple of contracts.

https://www.cmegroup.com/trading/metals/precious/e-micro-gold_quotes_globex.html

 

[Pkay]

MGC is the only micro that I have seen that you can expect to have decent movement, because it exactly tracks the GC (which has decent movement), based on the nature of the contract. All it's specs are exactly the same as GC, just 1/10th the size.

But you have to remember. If yer down to trading MGC, you don't need a whole lot of liquidity, because you're trading for $1 per tick. If you can get really good at reading the GC movement, you will be able to profit on the MGC with your analysis , i.e. $2-3 per tick for a couple of contracts.

https://www.cmegroup.com/trading/metals/precious/e-micro-gold_quotes_globex.html

Thanks, that's very useful you know. Couple of questions if you don't mind:

1. When you say that the MGC chart mirrors the GC chart does that mean that you don't get big gaps in the charts due to low liquidity?

2. How about the M6E as an alternative to MGC? This trades off the 6E charts but is also 1/10 is size. How would M6E compare to MGC in terms of liquidity?

Many thanks.

 

[ironchef]

Thanks for the welcome, really appreciate it!

Yes, I'll happily admit that I am a newbie so your view on the complexity of trading options resonates with me.

I think I'm attracted to options as I've seen 100 lot contracts on highly liquid equities going for less than $100. I suppose these are exactly the type that will more than likely expire worthless?

What instrument or market would you recommend that, with a small account of $2,000, I start trading?

Also, do you mind if I ask you what you trade?

Many thanks!

You should start with a sim account rather than with real money.

I exclusively trade equity options, no futures, commodities or indices. I started my first trade back in 2013, joined ET in 2014 to learn how to trade.

 

[Overnight]

Thanks, that's very useful you know. Couple of questions if you don't mind:

1. When you say that the MGC chart mirrors the GC chart does that mean that you don't get big gaps in the charts due to low liquidity?

No, I'm saying that the instruments track each other exactly in price movement. The charts may look a bit different based on what graphics you use. Here's today's example...

2. How about the M6E as an alternative to MGC? This trades off the 6E charts but is also 1/10 is size. How would M6E compare to MGC in terms of liquidity?

Many thanks.

I haven't looked at FX futures in over two years. Only thing I recall about the 6E and M6E is I didn't like the patterns/volume as compared to other futures. I reckon' they have changed since then, as the whole world has changed. I just don't know FX.

If you wish to continue the convo on futures, you should start a new thread in the futures section, as this is the options pit of the forum. Everyone here is slick with extra virgin olive oil.