Interesting spreads ESFX. I did a simulation on ThinkOrSwim's "OnDemand" which can simulate positions on options in the past, and has historical option prices, on CELG approximating the sell call at $1.15, strike 82.5 , Jan13, and the buy call at $3.50, strike 80, Feb13. from 12/20/12 to 1/3/13
Then moved the simulated time to Jan. 3rd. Result was a similar win. Overall, I think it looks good for a little more risk for more reward. One can get out of the position faster if price goes in the money. So it still requires a good directional play.
Last edited by Cloudy; January 10th, 2013 at 01:37 PM.
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Sorry guys---been out of commission with the flu. I expect to be much better by next week.
Kissandfly, there is no need for special software, only current or up to date option prices and charts.
Smcdaniel5507-- low risk high outcome--I'm not sure if you have follow this thread, but I do understand its title may have included binary options as you discussed, this is not the intent of my Day Trading Options thread.
You have the right idea and you might even be profitable on these trades.
I have traded some similar spreads to this with success, but most are entered where the short option pays for nearly half of the long option. That is why I noted that it is hard to locate such a trade in ETFs.
Last edited by ESFXtrader; January 10th, 2013 at 02:16 PM.
I will certainly be on the lookout for that ratio ( where the short option pays for half of the long). Thanks for that bit of info.
Currently, the diagonal spread on SPY has gone into profit at $0.22 x 500 = $110 / $915 = 12% return.
Again thanks for the tips. I hope you're fully recovered from your bout with the flu.
Hello fellow option traders.
I have decided to add another trade for your perusal. Some time back, I placed a trade and kept records on it. I just ran across the record that I kept. I thought you might like to consider just such a trade for yourself.
The length of time held on this trade depends on the trader. At the time placed, we had no weekly options. Certainly, now, that offers so many more trades during the year.
The trade is to buy an ITM Strangle on the symbol SPY on Tuesday before option expiration. The SPY was priced at $129.2 when the trade was placed. After checking historical records, I concluded that the best price for the options was as close to $1.50 for both the calls and puts. On my trade, the calls cost $1.50 and the puts cost $1.65. The cost of my trade was 1.5 + 1.65 = 3.15 X 100 shares per contract = $315 X 10 contracts for my trade = $3150 + commissions of $40 (buy & sell) = Total of $3190. The spy price dropped to $127.50 and my trade sold for $9200. Puts = 9.00 and calls = .20 $9200 - $3190 = $6050 net.
One could trade this on IWM, SPY, etc.
I hope this gives you another idea on how to set up a trade.
If the volatility is high, the cost will be high and limits potential profits. Any big move in the market or increase in volatility will show a profit on the trade. Sometimes the trade can be close on the same day. One can also only close one side, the hugely profitable one, of the trade if they expect a reversal, where the other side can add more profit.
I will add the option chains so you can follow it this week.
PS Although I had paper traded this for a few months with success, This is the only live trade I ever placed. When I saw these records, I sure was sorry That I hadn't continued this trading. I will start with less contracts and build up according to volatility. You must decide for yourself if this looks good for you.
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Hey, I definitely agree with you. I did a few trades like with AAPL a few months back. It pays well when the underlying moves nicely. But if the underlying does not move, then both the call and the put end up decaying. I worked like 2 times and then didnt work the next 3 times. The next 3 times, AAPL did move bu not as much to give me nice profits against the time decay for the weekly options.
I havent tried on SPY. But this should work in an environment when a large move is expected. But the problem is that with the expectance of a large move, the IV increase as well and as a result your call and put option price gets bloated. By the time the move is done, IV collapses. As a result of IV collapse, the inflated value of both your legs comes back to normal. So I treat this as a gamble. I cant see this having atleast a 60%-70% success.
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Thanks for starting this thread and putting in an effort over such a long time. I am very interested in your take on options trading.
It seems to me that the critical factor in the success of the trades is the correct reading and prediction of the underlying stock. Not only this, but it has to actually move enough to give you a profit that it must be at least a moderately volatile stock. Whilst I appreciate the there is some protection from the downside in your time decay (depending on your position), is it not your excellence in reading the market rather than your particular strategy that makes you successful in these trades?
Could you please update us on your current thinking regarding these options strategies and maybe expand a little on what and why you are looking for in the initial setup to choose a direction. I realise this is a very large question, and appreciate whatever time you can give it.
I have not had much time to followup with threads, but you may want to know that you can get a list of all the weekly options available to trade here: CBOE - Micro Site
Nothing has changed and day trading options is very profitable. It is best to use the shortest time frame option, as the option price moves more closely to the price of the underlying ETF or stock, etc. I recommend trading only those assets where there is sufficient volume on both the asset and options of it to allow you to get in and out of the trade without difficulty.
Here are some weekly options: DJX, SPX, NDX, RUT, DIA, SPY,
AGQ, EEM, EFA, EWJ, EWZ, FAS, FAZ, FXE, FXI, GLD, GDX, IWM, QQQQ, SDS
SLV, SSO, TBT, TLT, TNA, TZA, USO, UNG, UVXY, VXX, XLB, XLE, XLF, XME, XOP
AA, AAPL, ABT, ABX, CAN, AET, AGNC, AIG, AMRN, AMZN, ANF, ANR, APA, APC
APOL, ARNA, AXP, BA, BAC, BAX, BBRY, BBY, BIDU, BIIB, BK, BMY, BP, BRCM, BX
C, CAT, CELG, CF, CHK, CL, CLF, CMG, COF, COH, COP, COST, CSCO, CREE, CRM, CVX
DDD, DE, DECK, DELL, DIS, DNDN, DOW, DVN, EBAY, EMC, F, FB, FCX, FFIV, FSLR
GE, GG, GILD, GM, GMCR, GME, GOOG, GPS, GRPN, GS, HAL, HD, HES, HLF, HON, HPQ
IBM, INTC, IOC, IP, ISRG, JCP, JNJ, JOY, JPM, KMB, KO, KORS, LINE, LLY, LNKD, LOW, LULU, LVS
M, MA, MCD, MCP, MDLZ, MET, MGM, MMM, MNKD, MON, MOS, MPEL, MRK, MRVL, MS, MSFT, MU
NAV, NEM, NFLX, NKE, NOK, NTAP, NVDA, ORCL, OXY, PBR, PCLN, PFE, PG, PM, POT, PSX
QCOM, QCOR, QIHU, S, SBUX, SCTY, SINA, SLB, SLW, SNDK, SODA, SRPT, STX, SU
T, TGT, TIF, TIVO, TSLA, TSO, TXN, UA, UNH, UNP, UNXL, UPS, UTX, V, VALE, VHC, VLO, VMW, VOD, VVUS, VZ
WAG, WFC, WFM, WLT, WMB, WMT, WYNN, X, XOM, YHOO, YUM, ZNGA
I suggest you only try and follow the bigger movers peak to peak or P/P where the best opportunities are offered. Think: volume and range and option price for your account. GOOG is not suitable for some accounts. The ideal price for more costly options is from $5 to $6. It is advantageous to use a Delta of around .70 for most day trading.
Here is an explanation of delta for those who do not know what it is: Learning Markets - Investing education and trading ideas
If your account is under $25,000, you will need to grow your account to actually day trade it. One way is to place a trade as a day trade and after you have your expected move on your option, sell an option against your position which puts credit in your account. The sell or short option may even make your trade a free trade, if the option has moved sufficiently enough to cover the original cost of your long option. You can close the position the following day. For those with an account under $25K who make more than 2 day trades during any five day time frame, you will be blocked from further trading for some time. You will only be able to close an open trade.
Hope this helps and may you succeed in all you endeavors.
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