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Day Trading Options
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Day Trading Options

  #1 (permalink)
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Day Trading Options

Day Trading Options
As promised, this will be the first of several threads on trading options. I will include my very safe Diagonal Spread Trading (of which I have had no losses for a long time) and Adjustments in later threads.
I hope there are some who will add to this and the following threads. I will include some of the best ETFs and stocks to day trade with options and a successful way to do it. Most of you already know that to day trade stocks or options, one needs an account of at least $25,000, but if, at any time, you fall below the $25K, you can't continue trading until the account is back up to the minimum. I have day traded both stocks and options and found that option trading is much more exciting and profitable. In stocks, one must use a large portion of the $25K, even with 4 to 1 margin, to make a large profit on a single trade. Not so with options. Imagine investing (but not putting all at risk) $1,000 with an opportunity to make $1,000 in any given day. You should know that the most current month of options moves most closely with the stock or ETF price action. The more intrinsic (in the money-ITM) value an option has, the more its price moves in sync with the price of the asset. I will show you a few examples of day trades notated to get your juices flowing.
The list of stocks and ETFs here is not complete and therefore, I will add to the list later. I have a more complete list of ETFs that have the volume needed with a small enough spread to make them desirable to day trade or swing trade. This list is made up of stocks and ETFs with its options' strike prices in increments of $1.00. At a later time, I will show you how you can use this to your advantage to day trade options with only a small account, ie $5,000. Imagine making 3 nice trades during the week and adding $3K to your account. Very soon, I will get this thread added for those who do not have the account to day trade. In the mean time, put the asset and option you wish to trade on a chart similar to that seen below and using these examples, learn to day trade your favorite vehicle.
You will need to know the earnings date on any stock of an option that you hold overnight, so always be aware of that, as it is best not to risk holding a call or put through earnings.
I have began adding the earnings' dates to some of the stocks below." Obviously, the ETFs will not have earnings' dates, but big news coming out can cause sudden moves, so be aware of those. You will see that often the volume is to low to trade some of these and you will need to be sure you can get out of any trade you open.
Check the Volume of the stock and the option you intend to trade!!!!
Also, varify earnings date, as you are responsible for your trades.
~A Earnings-Feb 12, May, Aug, Nov
~AA Earnings-Jan 10, Apr, July, Oct
~ABB Earnings-Feb 17, May, Aug, Nov Low volume
~ABC Earnings-Jan 24, Apr, July, Oct Low volume
~ABT Earnings-Jan 20, Apr, July, Oct
~ACH Earnings-Mar 21, Jun, Sept, Dec
~ACI Earnings-Jan 28, Apr, July, Oct
~ACN Earnings-Mar 24, Jun, Sept, Dec
~ADBE Earnings-Mar 22, Jun, Sept, Dec
~ADI Earnings-Feb 14, May, Aug, Nov
~ADM Earnings-Jan 31, Apr, July, Oct
~ADSK Earnings-Feb 25, May, Aug, Nov
~AEO Earnings-Mar 9, Jun, Sept, Dec
~AET Earnings-Feb 4, May, Aug, Nov
~AGNC Earnings-Feb 7, May, Aug, Nov
~AGO Earnings-Feb 21, May, Aug, Nov
~AIG Earnings-Late Feb, May, Aug, Nov
~AKS Earnings-Jan 25, Apr, July, Oct
~ALKS Earnings-Feb 4, May, Aug, Nov
~ALL Earnings-Feb 9, May, Aug, Nov
~ALR Earnings-Feb 14, May, Aug, Nov
~ALTR Earnings-Jan 25, Apr, July, Oct
~AMAT Earnings-Feb 16, May, Aug, Nov
~AMLN Earnings-Jan 26, Apr, July, Oct
~ANF Earnings-Feb 16, May, Aug, Nov
~ANR Earnings-Feb 9, May, Aug, Nov
~APKT Earnings-Feb 1, May, Aug, Nov
~APOL Earnings-Mar 30, Jun, Sept, Dec
~ARM Earnings-Feb 1, May, Aug, Nov
~ARMH Earnings-Jan 26, Apr, July, Oct
~ARO Earnings-Mar 10, Jun, Sept, Dec
~ARUN Earnings-Feb 18, May, Aug, Nov
~ATHR Earnings-Feb 10, May, Aug, Nov
~ATI Earnings-Jan 26, Apr, July, Oct
~ATML Earnings-Feb 9, May, Aug, Nov
~ATVI Earnings-Feb 9, May, Aug, Nov
~AUY Earnings-Feb 23, May, Aug, Nov
~AVP Earnings-Feb 8, May, Aug, Nov
~AXP Earnings-Jan 24, Apr, July, Oct
~BA Earnings-Jan 26, Apr, July, Oct
~BAC Earnings-Jan 21, Apr, July, Oct
~BBBY Earnings-Jan 4, Apr, July, Oct
~BBY Earnings-Mar 24, Jun, Sept, Dec
~BCSI Earnings-Feb 17, May, Aug, Nov
~BEXP Earnings-Feb 24, May, Aug, Nov
~BK Earnings-Jan 17, Apr, July, Oct
~BKS Earnings-Feb 21, May, Aug, Nov
~BMC Earnings-Feb 2, May, Aug, Nov
~BMY Earnings-Jan 27, Apr, July, Oct
~BP Earnings-Feb 1, May, Aug, Nov
~BRCM Earnings-Feb 1, May, Aug, Nov
~C Earnings-Jan 18, Apr, July, Oct
~CHK Earnings-Feb 3, May, Aug, Nov
~CMCSA Earnings-Feb 16, May, Aug, Nov
~CROX Earnings- Feb 5, May, Aug, Nov
~CSCO Earnings-Feb 9, May, Aug, Nov
~CTRP Earnings-Feb 13, May, Aug, Nov
~DELL Earnings-Feb 15, May, Aug, Nov
~DIS Earnings- Nov 11, Feb, May, Aug
~DNDN Earnings-
~DOW Earnings-
~EBAY Earnings-
~EEM
~EMC Earnings-
~EXPE Earnings-
~F Earnings-
~FAS
~FAZ
~FITB Earnings-
~FRX Earnings-
~FWLT Earnings-
~GE Earnings-
~GFI Earnings-
~GG Earnings-
~GILD Earnings-
~GLD
~GLW Earnings-
~GME Earnings-
~GNW Earnings-
~GAP Earnings-
~HAL Earnings-
~HD Earnings-
~HGSI Earnings-
~HIG Earnings-
~HMY Earnings-
~HOG Earnings-
~HON Earnings-
~HPQ Earnings-
~HRB Earnings-
~HTZ Earnings-
~IGT Earnings-
~INTC Earnings-
~IP Earnings-
~IR Earnings-
~ISLN Earnings-
~IYM
~JBL Earnings-
~JCP Earnings-
~JDSU Earnings-
~JEF Earnings- Jan 17, Apr, July, Oct
~JNPR Earnings-Jan 19, Apr, July, Oct
~JPM Earnings-
~DFT Earnings-
~KFT Earnings- Feb 4, May, Aug, Nov
~KLAC Earnings-
~LCC Earnings-
~LDK Earnings-
~LEN Earnings-
~LULU Earnings- Mar 6, June, Sept, Dec
~M Earnings-
~MBI Earnings-
~MCHP Earnings-
~MDT Earnings-
~MEE Earnings-
~MET Earnings-
~MGM Earnings-
~MMR Earnings-
~MO Earnings-
~MRK Earnings-
~MRO Earnings-
~MRVL Earnings-
~MS Earnings- Jan 20, Apr, July, Oct
~MSFT Earnings-
~MYL Earnings-
~NG Earnings-
~NE Earnings-
~NOK Earnings-
~NTES Earnings-
~NVDA Earnings-
~NYX Earnings-
~OIH
~ORCL Earnings-
~OSK Earnings- Low volume
~PAY Earnings-
~PFE Earnings-
~QCOM Earnings-
~RHT Earnings- Mar 22, Jun, Sept, Dec
~AVP Earnings-
~SBUX Earnings-
~SDS
~SLW Earnings-
~SMH Earnings-
~SNDK Earnings- Jan 21, Apr, July, Oct
~SSO
~STI Earnings-
~STX Earnings-
~SWN Earnings- Jan 28, Apr, July, Oct
~SYY Earnings-
~T Earnings- Jan 21, Apr, July, Oct
~TSL Earnings- Feb 15, May, Aug, Nov
~TXN Earnings- Jan 24, Apr, July, Oct
~UNH Earnings-
~USB Earnings- Jan 26, Apr, July, Oct
~USO
~UYM Low volume
~VLO Earnings-
~VZ Earnings-
~WAG Earnings-
~WDC Earnings-
~WFC Earnings-
~WFR Earnings-
~WFT Earnings-
~WMB Earnings-
~X Earnings-
~XLB
~XLF
~XRX Earnings-
~YHOO Earnings-
~YUM Earnings- Feb 2, May, Aug, Nov

Weekly option expirations with $1.00 increments:
BAC, BP, C, GDX, GE
ETFs:
DIA, EEM, FAS, FAZ, GDX, GLD, IWM, QQQQ, USO, VXX

I will add more and update this ASAP, but my trading must come first. Learn to read the charts. All in due time. Good learning and good trading.

WK

Attached Thumbnails
Day Trading Options-daytradeoptions-on_x.png   Day Trading Options-daytradeoptions-on_iwm-1-4-11.png  

Last edited by ESFXtrader; December 30th, 2013 at 08:10 AM. Reason: Adding Weekly Optionables
 
  #2 (permalink)
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Day Trading Options

I have not been able to be around much lately. Here is what I promised.


Here are 2 examples of Day Trading AAPL call options on a 10 Minute bar chart. The first chart shows a gain of $149 per contract and the second chart shows a gain of $205 per contract. On more pricey stocks, I prefer the strikes where the price of the option falls between $4.00 and $8.00 per share because I trade a set number of contracts. With this price area, I have seen the best bang for the buck. Otherwise, I prefer buying at the money (ATM) options. If you have limited funds because of money in other trades, you may choose a lower cost per contract. Remember that holding these trades overnight with a drop in volatility, VIX, can dramatically drop the value of the option price; not to mention the change in the price of the stock or ETF.


If you don't have a Day Trading account of >$25K, such as $5K to $10K, you will not be able to day trade AAPL or any of the stocks with a higher strike price separation. That is the advantage of the $1 increments on the strike price of those in the list. After buying the option and the move has been made, you can sell an option against the one you bought to make it a spread trade (Leg into the spread). Often times you will have a credit because of the move, even though the short (sold) option is further out of the money than the long (bought) option. You can close the trade the following day or sometime in the future.
The third chart is the IWM and the put option closest to the money (ATM) as the price of IWM was at $80.31. The buy was at the 2nd red bar on the 10 min bar chart of IWM, which coincides with the first bar >-45 on the CCI. As you can see on the charts, there are three reasons for the timely close of the trade: Divergence of IWM and put option, hit of Outer BB of both the IWM and Option, and the cross of 20EMA over 20SMA. The buy price of the put option was $48 and the close price was $119 per contract. Although the spread reached $1.19/1.21, the highest price traded was 1.19 and therefore you could have closed it at the high at the outer BB at $119 per contract. Three of these day trades within a week in an account not qualified for day trading will prevent further trades until three days after close of the last trade at best, that is with most brokers. Most brokers will allow close of any open trades only. The solution was to sell the $79 Put against the long $80 Put. It would have sold for $61 per contract giving you a credit of $13 per contract with more to come at the close of the trade. Even at the close of the trade, you can day trade in the same way by buying back the short option and later after a continuation move, sell the long option. Practice to get the hang of it. You can double or triple your investment on any given trade using this technique.

WK

Attached Thumbnails
Day Trading Options-aapl_option_day_trade_on_1-14-11.png   Day Trading Options-aapl_option_day_trade_on_1-18-11.png   Day Trading Options-iwm_puts_daytraded_1-18-11.png  
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  #3 (permalink)
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Thanks for sharing, ESFXTrader.

Do you feel you are able to make more money or make it with less risk on the same trades using options as opposed to buying/selling the underlying? Or are you mainly using options to avoid day-trading restrictions?

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  #4 (permalink)
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Thanks ESFXTrader.
What is your "very safe Diagonal Spread Trading" ?

I believe only in profits, not in prophets.
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  #5 (permalink)
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Day Trading Options


GoldStandard View Post
Thanks for sharing, ESFXTrader.

Do you feel you are able to make more money or make it with less risk on the same trades using options as opposed to buying/selling the underlying? Or are you mainly using options to avoid day-trading restrictions?

First, the restictions are identical for stocks and options; that is, both require a minimum of $25K to day trade. I was showing those who have not yet reached that level a safe and profitable way to do a similar trade.
As far as making money, there is little at risk when day trading options. If you buy an option that cost $1.00 and it moves against you, .12, that is only $12 per contract, while the stock or ETF may have moved .25 against you and required far more capital for the same number of shares in the trade. I have traded both and much prefer the options....to each his own. 10 option contracts at $1.00 is only a $1000 investment to control 1000 shares, while the same ETF or stock could cost $25K to $125K divided by 4 (using 4 to 1 margin). There is no margin offered when trading options, but the leverage offered easily makes up for far more than the margin. The leverage on the last days before contract expiration is the best and offers terriffic opportunities. Make a note of some option prices now, in the AM, near close on Thurs, Fri AM and nearing close Fri and watch how close the option prices follow the move of the stock or ETF.
So, getting back to your question, for far less money, you can make far more money when trading options compaired to stocks and ETFs. I hope that covers any questions but I will try to keep up and good trading.
WK

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  #6 (permalink)
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Day Trading Options


kissandfly View Post
Thanks ESFXTrader.
What is your "very safe Diagonal Spread Trading" ?

That is for another thread of which I am continuing to work. I will put it together and show it soon. Thanks for your inquiring about it. It does continue to work, as I continue to close winning trades.

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Just a few thoughts that I'd like your response to...

So regarding earnings, when do you trade them, just before earnings, or the day after earnings are announced? If the day after, you're going to have large spreads to battle against, especially near the open of the market. If before earnings, you're going to have to fight against increased implied volatility going into the release.

Using ITM has the benefit of a good delta and as the trade moves against you it moves against you slower than it would in your favor, thanks to gamma, but you have to outlay more cash for ITM than ATM or OTM options.

Attached Thumbnails
Day Trading Options-aapl.png  
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  #8 (permalink)
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Day Trading Options


shodson View Post
Just a few thoughts that I'd like your response to...

So regarding earnings, when do you trade them, just before earnings, or the day after earnings are announced? The following is in the first post:
"You will need to know the earnings date on any stock of an option that you hold overnight, so always be aware of that, as it is best not to risk holding a call or put through earnings."

If the day after, you're going to have large spreads to battle against, especially near the open of the market. If before earnings, you're going to have to fight against increased implied volatility going into the release.
On any trade, the wider the spread, the more risk you take on. When day trading, as long as the spread is to your liking and the setup is good on a potentially nice moving vehicle or equity, it doesn't matter the day. The exception is when market moving news or news on the equity is coming out during the day.
Using ITM has the benefit of a good delta and as the trade moves against you it moves against you slower than it would in your favor, thanks to gamma, but you have to outlay more cash for ITM than ATM or OTM options.

The price has more to do with one's preference when all else is taken into account. If one's account is fairly large, I have found that the $4 to $7 price range on more expensive equities moves best and you will find the delta to your liking, especially nearing option expiration. For the low priced equities and those with $1 strike increments, you will see very low prices, even <$1 can move very nice, especially near expiration. Therefore, even those with smaller accounts can find something to their liking.
IWM 80 strike Call options are priced at 1.02/1.04 and are .57 ITM and expires in 4 days. Delta is .6599 and there were 3708 contracts traded. There were 11901 contracts traded on the IWM81 strike call options which closed at .45/.47 and are OTM with a delta of only .4234
You decide which is the better trade.

Attached Thumbnails
Day Trading Options-iwm_call_option_trades_on_2-7-11.png  
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Hello WK,

Any updates on the Diagonal Spread Options trade setups that you use? I'm curious if you've started the new thread yet?

Best Regards,

Kirk

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  #10 (permalink)
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Day Trading Options


As seen in the chart, the SPY call option buy at 10AM using the count back method on both the option and the SPY charts worked for a doubler in only 2 & 1/2 hours. Cost $70 per contract at .70. You will note that the buy was at the close of the down bar for the perfect entry, right at the low of the day. I continue to see that this method is hard to beat. Hope some have given it a try. It is clear cut and easy to follow. Good trading all. Headed out after another great day in the markets.
WK

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