Daytrading and options - Trading-Lab

breakout · #1 03-03-2008, 02:52 PM

I'm looking into ways to approach daytrading from an options point of view. Ideally, I would like to do very short-term intraday trading (holding positions for minutes or hours) using options as the trading vehicle.

Picking underlyings would be based on the same criteria as if I were trading equities (charts, TA, etc), but I would use options to carry out the trade instead.

is this a good idea?

Leth · #2 03-03-2008, 09:46 PM

just a couple of ideas...

make sure your option contracts are at the money or in the money. instrinsic value is a good thing...cheap out of the money options are becoming more and more of a suckers bet.
day trade options like you would ordinary stocks...just bet less of your wad on each trade. itll save your behind in the long run...

just my 2 cents anyways...

kerahc · #3 03-03-2008, 11:35 PM

Quote:

Originally Posted by Leth

just a couple of ideas...

make sure your option contracts are at the money or in the money. instrinsic value is a good thing...cheap out of the money options are becoming more and more of a suckers bet.
day trade options like you would ordinary stocks...just bet less of your wad on each trade. itll save your behind in the long run...

just my 2 cents anyways...

Leth you speak the truth, OTM options are very risky and I personally only think people who understand all the greeks of options should even touch them. I've noticed with people that when they start trading options during the day they start to over trade and churn their accounts. Follow your trading plan very strictly so it doesn't happen. They do offer some great leverage though...

ProTrader · #4 03-05-2008, 08:54 PM

most new options traders are attracted to OTM options because they "look" cheap

Mr. Blonde · #5 03-06-2008, 04:51 AM

I've been researching this too. Looking into using stocks I already like to trade with a decent implied volatility and buying close to the strike several months out for a decent premium on the covered call. So obviously the net debit would be good but then you would be faced with holding the underlying for quite awhile in an uncertain market. The consensus seems to be that you shouldn't write a covered call if you expect the underlying to drop, but if you also expect it to have daily swings of 4% or 5% either way then you could in theory capitalize on the drop in call option price to buy it back and close out. Now you're free to sell the underlying or wait for another swing closer to a strike that has an attractive premium and repeat the process.

If the pps does go south and you do buy the call back and the pps continues going south you'd have a decision to make with your break even point in mind, but at least you've already made something on the trade. If the pps goes in the money and you get assigned you made money on the premium plus the difference in price paid and the strike.

Feel free to point out any problems with this, I haven't traded any options yet and so I'd like to find out here what I may be missing or discounting rather than on the Street on the other side of your trade

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#1 03-03-2008, 02:52 PM
breakout Member Join Date: Jun 2007 Posts: 63	Daytrading and options I'm looking into ways to approach daytrading from an options point of view. Ideally, I would like to do very short-term intraday trading (holding positions for minutes or hours) using options as the trading vehicle. Picking underlyings would be based on the same criteria as if I were trading equities (charts, TA, etc), but I would use options to carry out the trade instead. is this a good idea?

#2 03-03-2008, 09:46 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	just a couple of ideas... make sure your option contracts are at the money or in the money. instrinsic value is a good thing...cheap out of the money options are becoming more and more of a suckers bet. day trade options like you would ordinary stocks...just bet less of your wad on each trade. itll save your behind in the long run... just my 2 cents anyways... __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School

#4 03-05-2008, 08:54 PM
ProTrader Senior Member Join Date: Jun 2007 Posts: 109	most new options traders are attracted to OTM options because they "look" cheap

#5 03-06-2008, 04:51 AM
Mr. Blonde Member Join Date: Jan 2008 Posts: 37	I've been researching this too. Looking into using stocks I already like to trade with a decent implied volatility and buying close to the strike several months out for a decent premium on the covered call. So obviously the net debit would be good but then you would be faced with holding the underlying for quite awhile in an uncertain market. The consensus seems to be that you shouldn't write a covered call if you expect the underlying to drop, but if you also expect it to have daily swings of 4% or 5% either way then you could in theory capitalize on the drop in call option price to buy it back and close out. Now you're free to sell the underlying or wait for another swing closer to a strike that has an attractive premium and repeat the process. If the pps does go south and you do buy the call back and the pps continues going south you'd have a decision to make with your break even point in mind, but at least you've already made something on the trade. If the pps goes in the money and you get assigned you made money on the premium plus the difference in price paid and the strike. Feel free to point out any problems with this, I haven't traded any options yet and so I'd like to find out here what I may be missing or discounting rather than on the Street on the other side of your trade