Why trade stocks?

spreadn00b · Oct 21, 2006

Maybe I'm missing something, but with earnings season and shorts getting beaten up on this rally, I see so many threads here about not getting out when one should, having the stock gap down/up and getting creamed, not having a stop loss and getting creamed, etc.

It seems to me that everyone has a profit target and some may have a stop loss (but I tend to agree with the people that don't because it seems to get in the way in the long run). Using vertical spreads seems to a) set your profit and stop loss for you already b) allow you to stay in the game even though your stop loss has been "hit", you're not done if the stock rallies back and you're not going to lose more if the stock goes lower. c) your "trading plan" is pretty much written for you by the vertical you choose and d) requires less of your capital at risk.

So I wonder, why trade stocks at all? I guess you'd have to if the stock does not have options. Is it the b/a spread that irritates people? Will there be a mass movement to options when they go to penny pricing?

LT701 · Oct 21, 2006

'Is it the b/a spread that irritates people? '

YUP, it does me

extremely hard to take small losses with options

spreadn00b · Oct 21, 2006

So when they go to pennies, will that convert you or are there still other irritations such as theta and vol crush? Also, out of curiosity, what is your trading time frame?

Quote from LT701:

'Is it the b/a spread that irritates people? '

YUP, it does me

extremely hard to take small losses with options

LT701 · Oct 21, 2006

Quote from spreadn00b:

So when they go to pennies, will that convert you or are there still other irritations such as theta and vol crush? Also, out of curiosity, what is your trading time frame?

there's just so much more that you have to know with options, such as which ones have the volume, what strike price, what dates, etc

and you've got to be right, right now, or decay kills you

i'd rather know fewer things well, than a lot of things poorly

i just dont know how to control risk with them, so i dont try

IV_Trader · Oct 21, 2006

Quote from spreadn00b:

So when they go to pennies, will that convert you or are there still other irritations such as theta and vol crush? Also, out of curiosity, what is your trading time frame?

don't count so much on penny increment so much. You will be ABLE to enter , but you still need a buyer/seller on the other side to take the trade. But it will definetly helps in some cases.

Bitstream · Oct 21, 2006

i like to trade 'em at exp day, itm ones...they move slightly more than the underlyin' havin' a delta exceedin' 1 and u can take advantage of the serious leverage. eg. aapl 75 calls would have given u 10/1 leverage on friday and spread is just 5c, not that big of a whoop.

spreadn00b · Oct 21, 2006

Definitely a good point, although it certainly can't get much worse than what it is now.

Quote from IV_Trader:

don't count so much on penny increment so much. You will be ABLE to enter , but you still need a buyer/seller on the other side to take the trade. But it will definetly helps in some cases.

IV_Trader · Oct 21, 2006

Quote from spreadn00b:

Definitely a good point, although it certainly can't get much worse than what it is now.

agree . BTW , I already saw some combos quotes in pennies ( probably BOX price improvment) , like 1.32 bid / 1.39 ask , so I think that broker's platforms are getting ready for it.

spreadn00b · Oct 21, 2006

Yes, I've seen this too but only on spreads too. If you bought the options individually, they were still in nickel increments. It may have been some sort of test because I saw it about a week or so ago for a couple of days and haven't seen it so much lately. I use Interactive Brokers.

Quote from IV_Trader:

agree . BTW , I already saw some combos quotes in pennies ( probably BOX price improvment) , like 1.32 bid / 1.39 ask , so I think that broker's platforms are getting ready for it.