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Let's Trade Options

  • #17,641
  • Jun 9, 2020 6:15am Jun 9, 2020 6:15am
Hi

What's your style for trading Options? Do you base trades off intraday or daily price action? I've been in and out of options sporadically, esp when it's CHEAP. Increasingly finding that trends in FX are getting rarer these days, while trends in US stocks are crazy to say the least
  • #17,642
  • Jun 9, 2020 10:59am Jun 9, 2020 10:59am
Quoting moneymaker2
In the following: AAL Jun19 18 PUT @ $1.44 Should be good for a little money.....
Out of the following:

AAL Jun19 18 PUT @ $4.90 up from $1.44

Nice little trade....
  • #17,643
  • Jun 9, 2020 11:03am Jun 9, 2020 11:03am
Quoting nathaniel
Hi What's your style for trading Options? Do you base trades off intraday or daily price action? I've been in and out of options sporadically, esp when it's CHEAP. Increasingly finding that trends in FX are getting rarer these days, while trends in US stocks are crazy to say the least
I trade straight PUTS/CALLS based on extreme overbought and oversold levels. Occasionally, I will make a few trades on instinct (like some recent AAL and CCL trades), but mainly just the overbought/oversold levels.

Remember with options, you don't have to catch a long trend with the stocks. My trade above was just a one day drop....they don't have to be of any long duration at all to be profitable, just in the direction you predict with an in-the-money or near-the-money trade....
  • #17,644
  • Jun 9, 2020 12:21pm Jun 9, 2020 12:21pm
In the following:

NIO Aug21 5 PUT @ $0.525 average

And now, we wait......
  • #17,645
  • Jun 9, 2020 6:16pm Jun 9, 2020 6:16pm
Quoting moneymaker2
{quote} I trade straight PUTS/CALLS based on extreme overbought and oversold levels. Occasionally, I will make a few trades on instinct (like some recent AAL and CCL trades), but mainly just the overbought/oversold levels. Remember with options, you don't have to catch a long trend with the stocks. My trade above was just a one day drop....they don't have to be of any long duration at all to be profitable, just in the direction you predict with an in-the-money or near-the-money trade....
I see. So you're mainly doing mean reversion trades in the direction of the main trend? Do you have use any scanning tools like FINVIZ?

For the few times I've traded options, I usually try to find an option expiry that's at least 2 weeks away to prevent excessive time decay. How do you decide which option expiry to buy?

I've been interested to look at US options obviously because they trend more and are more volatile.
  • #17,646
  • Jun 9, 2020 6:16pm Jun 9, 2020 6:16pm
Quoting moneymaker2
{quote} Out of the following: AAL Jun19 18 PUT @ $4.90 up from $1.44 Nice little trade....
Nice
  • #17,647
  • Jun 9, 2020 7:52pm Jun 9, 2020 7:52pm
Quoting nathaniel
{quote} I see. So you're mainly doing mean reversion trades in the direction of the main trend? Do you have use any scanning tools like FINVIZ? For the few times I've traded options, I usually try to find an option expiry that's at least 2 weeks away to prevent excessive time decay. How do you decide which option expiry to buy? I've been interested to look at US options obviously because they trend more and are more volatile.
You could say that, sort of, but I really don't care what the main trend is, as I am trading relatively short term trades from a few hours to a few days (maybe a little longer if I am trading off the weekly or monthly chart).

I simply look for extreme overbought or oversold conditions, make sure the stock is not going to release earnings before I think the move will occur, and that there is no major news on the stock (such as upgrade or downgrade or splits or something like that). But the stock being considered is important...you want one that moves a good bit and trades as over about $75 and has an average daily volume of around 1 million shares plus. Something like Ford (F), while being a solid stock to own, is bad for straight PUTS/CALLS because a good move on the chart may only be $0.50-$0.75, and that doesn't equate to squat on an option move.

I also recommend you try to buy at least 10 contracts at a time and work your way up from there. That takes the pressure off of having to make big moves to make any good money. The AAL 18 PUT above was 25 contracts, so it cost me $3600 (I don't consider fees and such since they are the same for every trade), so when it went up $3.46 above what I bought it at, that became $8650 profit which is a nice little trade. Now, you still make the same percentage return on fewer contracts, but you can have smaller moves bring in cash faster the more contracts you buy. Like the NIO 5 PUT above, I have 100 contracts that cost me $5250, but every $0.10 move in the option price is $1000 profit. Since the Daily, Weekly and Monthly chart all indicate it is going to drop, probably to around the $4-$5 area or lower, and will do so rather rapidly, I expect to make decent money on the trade.

As far as expiration date and strike, naturally I want the expiration to encompass the period I believe the move will occur. I usually don't go too far out when I trade off the Daily chart as the move typically occurs in just a few days. Plus, the longer you go out the more expensive it is. Same with strike prices....I just get one that will catch a decent amount of the move and still be affordable.

I am a trader and not an investor, so I do not have to wait for the entire move to occur, I take my profit and move on. And I look at the money I put in a trade like a used car dealership....you find a good, solid car that you are confident you can sell for a profit, you buy the car and then you turn around and sell for your profit. I don't look at the money as a R:R thing or only use a certain percentage of my balance or stuff that makes it harder....I simply buy and sell inventory.....
  • #17,648
  • Jun 9, 2020 9:01pm Jun 9, 2020 9:01pm
Quoting moneymaker2
{quote} You could say that, sort of, but I really don't care what the main trend is, as I am trading relatively short term trades from a few hours to a few days (maybe a little longer if I am trading off the weekly or monthly chart). I simply look for extreme overbought or oversold conditions, make sure the stock is not going to release earnings before I think the move will occur, and that there is no major news on the stock (such as upgrade or downgrade or splits or something like that). But the stock being considered is important...you want one...
Thanks for sharing your valuable insights

Yeah, noted on the "right" stocks to trade. Definitely gotta look at stocks that generally moves enough on average to make your money work for you. I suppose that also means you don't look at heavily manipulated stocks such as IVR or HTZ. Those things are only good for gambling. I was happy to trade in the direction of the irrational sentiments. Bought some puts back in March on RCL, DIS, and bought some calls on F, GE and RCL last week. Pure speculation but followed the obvious momentum

For sure, I won't be going in with 10 contracts for a start given that I've no edge in the US markets yet. I've been going in anywhere from 1 - 20 contracts for cheap options. Just started monitoring US stocks recently, and boy are they different from FX. For starters, they gap ALOT. And they also trend ALOT.

Do you trade FX? And what do you generally find are the differences? I find that we see ALOT of false breakouts in FX these days, but critical levels/zones do get respected. But when it ranges, I gotta sit on my hands and wait. For US stocks, however, I do find that even if a couple of stocks are ranging, there are still several that are trending for a few days at a time, at least. Therefore, it definitely presents more opportunities.

Well, for every $0.10 move, you get $1000 profit. But the reverse is true as well. Being able to handle $1000 losses for a $0.10 move is tough

Do you prefer trading options than day trading US stocks? I've been looking at both, and obviously both have pros and cons. But just wanted to get some insights on how you decided on options.
  • #17,649
  • Jun 9, 2020 11:21pm Jun 9, 2020 11:21pm
starting to look at Q2 ER setups...
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #17,650
  • Jun 10, 2020 8:35am Jun 10, 2020 8:35am
Quoting nathaniel
{quote} Well, for every $0.10 move, you get $1000 profit. But the reverse is true as well. Being able to handle $1000 losses for a $0.10 move is tough Do you prefer trading options than day trading US stocks? I've been looking at both, and obviously both have pros and cons. But just wanted to get some insights on how you decided on options.
Well, technically, the max amount you can lose is only what you put into the trade. But you only lose when you sell, so let's say the option went down $0.17 today from what it was bought at yesterday, there is no loss unless you close the position....so since the expiration is in August, it would have plenty of time to move back up PROVIDED IT WAS A GOOD TRADE TO BEGIN WITH!!

I basically day trade options (or the closest thing to day trading options you can get). To me day trading stocks and trading options doesn't even compare. Let's look at AAL...right now the stock is trading at $16.71 and say you think it is going to head back up again. To buy 1000 shares would be $16,710 and to "control" 1000 shares (10 contracts) via options (Jun19 17 CALL) would cost $1650. And you were right, it heads back up tomorrow and you decided to sell at the stock price of $20.25, so you made $3.54 profit per share or $3540 profit on you stocks. You CALL option would be worth roughly $4.50 (maybe more, depending on the speed it went up), or about $2.85 per share or $2850 total profit on the options.

So for stocks, you made $3540 profit off a $16,710 investment, or a 21% return. For options, you made $2850 profit on a $1650 investment, or 173% return. Both are profitable and both are good trades, but there is a big difference between the two, especially on the amount you need to be able to day trade stocks effectively.

I hardly ever trade currency any more. More just for fun, because all the good money is in options.
  • #17,651
  • Jun 10, 2020 5:46pm Jun 10, 2020 5:46pm
Quoting moneymaker2
{quote} Well, technically, the max amount you can lose is only what you put into the trade. But you only lose when you sell, so let's say the option went down $0.17 today from what it was bought at yesterday, there is no loss unless you close the position....so since the expiration is in August, it would have plenty of time to move back up PROVIDED IT WAS A GOOD TRADE TO BEGIN WITH!! I basically day trade options (or the closest thing to day trading options you can get). To me day trading stocks and trading options doesn't even compare. Let's look...
Yes, the good thing about options is that the max amount you can lose is what you put into the trade. And I totally agree with the line of reasoning for controlling the same amount of stocks with significantly less capital, so that's also a big plus for me.

When you say you day trade options, do you look at intraday prices or just daily prices?

What do you use to do your stocks screening?
  • #17,652
  • Jun 10, 2020 6:35pm Jun 10, 2020 6:35pm
Quoting nathaniel
{quote} Yes, the good thing about options is that the max amount you can lose is what you put into the trade. And I totally agree with the line of reasoning for controlling the same amount of stocks with significantly less capital, so that's also a big plus for me. When you say you day trade options, do you look at intraday prices or just daily prices? What do you use to do your stocks screening?
I just look at daily prices. I say day trading options more tongue-in-cheek, but sometimes my trades only last an hour or two, especially if I'm trading the OEX,

I use stockfetcher dot com to find my stocks to watch every quarter. Criteria is optionable, over $50, and two week average daily trading volume over 800K shares. Then I just chart them and look for extreme overbought and oversold conditions, check out the news and earnings timeframe and option prices and that's pretty much it.

(I do use a couple of indicators I don't share, because unlike FX, if everyone sees HD is about to make a move, traders in the HD options can actally greatly affect the option pricing and thus my profit! )….
  • #17,653
  • Jun 10, 2020 6:48pm Jun 10, 2020 6:48pm
Quoting moneymaker2
{quote} I just look at daily prices. I say day trading options more tongue-in-cheek, but sometimes my trades only last an hour or two, especially if I'm trading the OEX, I use stockfetcher dot com to find my stocks to watch every quarter. Criteria is optionable, over $50, and two week average daily trading volume over 800K shares. Then I just chart them and look for extreme overbought and oversold conditions, check out the news and earnings timeframe and option prices and that's pretty much it. (I do use a couple of indicators I don't share, because...
Ah cool! Thanks for sharing

Yes, completely understand, I definitely won't be asking you for your indicators. As much as it's useful, I hardly ever use them. I'm about to dump FX. The vol just isn't as good anymore. Gonna start filtering and looking at more options next!
  • #17,654
  • Jun 11, 2020 7:15am Jun 11, 2020 7:15am
Out of the following:

NIO Aug21 5 PUT @ $0.73 up from $0.525

NIO Aug21 6 PUT @ $1.32 up from $1.21

Made a little money. I'll be able to get back in cheaper before Friday....Weekly and Monthly charts still poised to go down, so grabbed a little profit and will be able to get back in cheaper than what I had, so a WIN-WIN.....
  • #17,655
  • Jun 11, 2020 1:01pm Jun 11, 2020 1:01pm
tryin to fade this dump with SPY Jun30 $322 long calls, bot for $1.25

regardless of whatever tf JPOW said, there is still nowhere else to go for yield besides equities
"If The Fool persists in his Folly he will become wise." - William Blake
  • #17,656
  • Edited 8:48pm Jun 11, 2020 6:31pm | Edited 8:48pm
Quoting The Fool
tryin to fade this dump with SPY Jun30 $322 long calls, bot for $1.25 regardless of whatever tf JPOW said, there is still nowhere else to go for yield besides equities
Wondering if after market prices and pre market prices are meaningful and significant?
  • #17,657
  • Jun 11, 2020 6:38pm Jun 11, 2020 6:38pm
What do you guys think about selling premiums in a bull market? Is it a generally successful strategy or will it blow up in your face kinda strategy?
  • #17,658
  • Jun 11, 2020 9:57pm Jun 11, 2020 9:57pm
Quoting nathaniel
Wondering if after market prices and pre market prices are meaningful and significant?
....not so much to me really, but I tend to trade at the close most often. Buying the close/selling the open has been analyzed alot....

https://finance.yahoo.com/news/buy-c...114705554.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #17,659
  • Jun 11, 2020 9:59pm Jun 11, 2020 9:59pm
Quoting nathaniel
What do you guys think about selling premiums in a bull market? Is it a generally successful strategy or will it blow up in your face kinda strategy?
selling puts or put spreads in this secular bull market has been bread n butter for many options traders.

If I were very well funded I would be selling options more, but I am playing a poor man's game....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #17,660
  • Jun 11, 2020 10:00pm Jun 11, 2020 10:00pm
Quoting The Fool
tryin to fade this dump with SPY Jun30 $322 long calls, bot for $1.25 regardless of whatever tf JPOW said, there is still nowhere else to go for yield besides equities
spoos up 36 in Asia, we'll see if the bounce can run into NY
"If The Fool persists in his Folly he will become wise." - William Blake
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