Using options for swing trading

[OverTheTop]

hello

is anyone using calls and puts instead of the underlying in their swing trading activities? Options give you additional leverage and also limit your overnight risk from holding your swing trading plays. On 1-week swings, it's a considerable reduction in overall risk. anybody trades this way? which strike and expiration would you buy?

[milo]

you are correct about options reducing your downside risk. However, you have to be careful about volatilities as options might be overpriced if the underlying had some violent move recently.

[charlesK]

I think the best strike/expiration combination for 1-week plays would be IN THE MONEY FRONT MONTH options…..

[ChaosTheory]

it can be done, but you have to stick to highly liquid and high delta options. Otherwise, you will incur in quite a bit of slippage on illiquid options. Low delta, on the other hand, happens when the underlying moves by a certain amount, but the option doesn't follow through in relative amounts. you don't want any of that

[doji]

you cannot play options the same way you play a stock. Stop orders, for example, don't get the same quality of execution due to bigger spreads in options. As chaostheory said, stick with highly liquid options.