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Day Trading Options
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Day Trading Options

  #41 (permalink)
Trading for Profit
West Coast of Florida
 
Futures Experience: Intermediate
Platform: TradeStation, Danials Trading
Favorite Futures: TF, CL, & HO HOs
 
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Day Trading Options


Lepanto View Post
ESFXtrader, thank you for being so generous in sharing this very nice system!
I've set up my TOS charts ( simplified, however) and I just wanted to check in if what I'm doing is right.

Question 2: How many days to expiration would still allow me to enter the trade?



VR

The shorter time frame the better, when holding a short option. Reason: time decay is faster the closer to expiration. The problem is that it is harder to find good trades close to expiration because the short option seldom covers enough of the long option cost. Take a screen shot of several option chains and watch the price action compared to the price action of the underlying asset. Note how the price of the asset must move in your direction to prevent the short term option value from dropping and the best results comes from the slow moving in your direction over several days.
Example: Asset at $50 with expectation of move up. Long next month out call option with a strike price of $48 and short current month call option of $50. Cost $1.8-$1.95. Use $1.90: $4/$2.10. Your long option is $2 ITM and the Short option is ATM. The asset price must move up to $52.10 at expiration to break even. If it does, the long option will be near $6.00 and the spread will be about $3.90 at close. You can see how many ways this can work for the trader with the long option. When you understand how the Greeks affect the option price, you will understand how good this system really is. Theta and Delta play the biggest parts in the relationship of the long to short option prices. I have seen these trades double in value as does this example.
WK


Last edited by ESFXtrader; December 7th, 2012 at 11:00 AM.
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  #42 (permalink)
Trading for Profit
West Coast of Florida
 
Futures Experience: Intermediate
Platform: TradeStation, Danials Trading
Favorite Futures: TF, CL, & HO HOs
 
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Posts: 505 since Jul 2010
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Day Trading Options

Diagonals instead of verticals
I have a list of stocks that I add to as I find another worth watching. I also remove some as the option trading drys up. I have found that many of the indexes and the better trade-able ETFs are harder to fine a good diagonal option trade. I determine which direction I expect the price to move and if there is a trade worth taking, I place an order under the split market price and often get filled. If I only traded options, I could watch for these opportunities all day, but my favorite trading is futures. Options have become more of a hobby and you can sleep at night knowing the risk is negligible. It has been a long time since I've had a loser. Of course, any trade can be one, but the odds are in my favor. Below are two more examples of these Diagonal Spread Trades. I have closed the YHOO trade for 13.5% gain as seen in the label row above the trade. The EEM trade is still open.
Good trading.
WK
PS As you can see, the screen shot of my trades shows how I keep up with my trades and when I need to close them. Hope this helps those interested in trying what I believe to be the safest way to trade options and was devised by me. This was my first trading plan of three that I devised. I showed the other 2 here. Only this forum has seen them in their entirety.

Attached Thumbnails
Day Trading Options-dia_trades_on_yhoo_-_eem-12-6-12.png  
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  #43 (permalink)
Trading for Profit
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Lepanto View Post
ESFXtrader, thank you for being so generous in sharing this very nice system!
I've set up my TOS charts ( simplified, however) and I just wanted to check in if what I'm doing is right.

1. If the trend is UP, I buy an ITM call option on a further-out month;
2. Then, I can either do a simultaneous or leg in to an OTM or ATM call option on the front month;
3. If trend is DOWN, I do the reverse by buying/selling puts;
4. The position of the 20EMA vs the 20SMA determines whether the trend is UP or DOWN;
5. The CCI -45/45 triggers/confirms the trade.

Question 1: what adjustments and how does one make the adjustment in case the market goes the opposite way?
Buy back what I sold and sell another OTM?
I realize that, by careful and judicious money/risk management, losses can be minimized. However, to complete the trading of this system, which I like very much, I just wanted a "what if " scenario as a way of putting my mind at ease.


VR

If you can successfully day trade or predict the price action for the next day, adjustments can be very profitable....If.
It is not necessary to make adjustments. If you choose to hold the trade until the short option is expiring, and you choose not to close out the trade, you can roll the short option to the next month for further gains on part or all of your contracts.
It is better to enter in more of a gradual trend. If you expect the price to move fast, just buy the call or put. Then, if you expect further moves, sell against the long option to cover most or all of your cost in the trade. Then you not only have a free trade, but a guaranteed winner. As you can see, it is not necessary to use the triggers unless you are buying calls or puts.
Good Trading and I hope this helps.
WK

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  #44 (permalink)
Elite Member
Germany
 
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Hello ESFXtrader,

thank you for showing us what is possible with your option strategies !

Does anyone know of a free service/website that lets me chart the weekly options to get a feel for this stuff ? I did not know the weekly options can move that dramatically !

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  #45 (permalink)
Trading for Profit
West Coast of Florida
 
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Platform: TradeStation, Danials Trading
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Posts: 505 since Jul 2010
Thanks: 56 given, 2,283 received

Day Trading Options

For those interested, the Diagonal spread trading continues to work well. For several months, not any of my spread trades have gone into the red. I closed the EEM trade with only a modest net gain of 2%. Below is the last spread on SPY. In less than 4 days, I closed the spread on 12/12/12 for a gain of 15.7%.
Good trading.
WK

Attached Thumbnails
Day Trading Options-spy_dia_spread_closed_12-12-12-15.7-gain.png  
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  #46 (permalink)
Trading for Profit
West Coast of Florida
 
Futures Experience: Intermediate
Platform: TradeStation, Danials Trading
Favorite Futures: TF, CL, & HO HOs
 
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Posts: 505 since Jul 2010
Thanks: 56 given, 2,283 received

Day Trading Options

Hello fellow option traders.
Are you a winner when it comes to trading options?
Do you still wonder if my Diagonal Spread trading strategy will work for you?
Are you yet to paper trade it?
Have you at least copied option strike prices and noted their price action to see how they reacted to the price action of the underlying asset?
Are you a conservative option trader?
Do you like low risk trades with a high percent win rate?
Maybe you should look into my spread trading.
Check out the last trade on CELG. I bought the spread when CELG was at $80.06 and my cost was $2.33 per share plus commissions of $1 per contract. Buy 1, sell 1 to open and sell 1, buy 1 to close =4 per trade per contract.
Long call Feb $80 call option at $3.61
Short call Jan $82.50 call option at $1.28
Difference of $2.33 + commissions (round turn) .04=$2.37 X 100 shares = $237 per contract cost.
The risk is far less than $100 on the trade unless the underlying asset went against your trade in a very big way.
After the sell on 1/3/13, the net gain was 18%. It only went 2-3% against me when the price of CELG dropped to its low of $77.22. Sold at 280-237-cost= 43/237=18.1%. With the price moving as high as 82.39 on 1/3 and 83.17 today-1/4, the spread also move up to as high as 2.90 yesterday and 2.95 today. Hopefully you can see the potential of consistent profits in these short term trades.
AS always, Good Trading.
WK
PS I have not had a losing trade in many months.

Attached Thumbnails
Day Trading Options-celg_dia_spread_closed_on_2013-01-03_-18-_gain.png  

Last edited by ESFXtrader; January 4th, 2013 at 01:29 PM.
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  #47 (permalink)
Trading Apprentice
Monrovia, California USA
 
Futures Experience: Intermediate
Platform: TOS, optionsxpress
Favorite Futures: options
 
Posts: 8 since Jul 2012
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ESFX,

I did a simulated trade on SPY this morning at about 7:20 am( Pacific Standard Time):
1. Spy was at 146.30
2. Bought to open FEB 13 146 call @ 2.43 ( -3 theta)
3. Sold to open JAN 13 147 call @ .60 (-4 theta)
4. Debit 1.83 x 5 contracts

Spy thereafter went down to 145.75, but my position was inching up (positive).
Not much considering the low range day that it has been.
But, is this how this thing is supposed to react? Spy was going against my position yet, had I liquidated my position at that point, I would have been positive or break-even minus commissions.

Spy is now at 145.97( 10:47 am) and I'm at break-even, minus commissions.
Interesting.

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  #48 (permalink)
 Vendor: mytraderadvisor.com 
The Valley ANGUILLA Caribbean
 
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Software

Is there a software you recommend to study this ?

I believe only in profits, not in prophets.
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  #49 (permalink)
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New York City NY/USA
 
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low risk high outcome

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  #50 (permalink)
Trading Apprentice
Monrovia, California USA
 
Futures Experience: Intermediate
Platform: TOS, optionsxpress
Favorite Futures: options
 
Posts: 8 since Jul 2012
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ESFX,

Yesterday, the $ 1.83 debit I "invested" for my simulated SPY diagonal moved from a low of $1.78 to $1.85.
This morning on the gap up, it got to $1.97, now at $1.95 ( SPY at 146.64)
Cool

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