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Scalping SPY options

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Scalping SPY options

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  #1 (permalink)
Colorado Springs, Colorado USA
Posts: 9 since Sep 2012
Thanks: 4 given, 1 received

Does anyone here do this, or know anyone who does? I've been practicing scalping SPY at the money options and have had good results with the timing. My question is, can it be done in the real world, even down to as short a trade times as a few minutes? Theoretically, the SPY options market would be the best for this strategy because it's liquid enough to have tight bid/ask spreads. At the money options can change by 10% in just a few minute based on small moves in the SPY. In the real market, is it logistically possible to get in and out of SPY options on small moves to try and scalp a few percent at a time? thanks for any help and ideas!

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  #3 (permalink)
Long Island, NY
Experience: Advanced
Platform: TOS & Tastyworks
Broker: TD Ameritrade
Trading: Equities, index options and futures options
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At the time frame you indicated, it's more efficient to just scalp the SPY.

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  #4 (permalink)
Columbus, OH
Experience: Advanced
Platform: TOS
Trading: options
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Posts: 11 since Sep 2012

The problem with ATM strikes is 2 fold:

1) delta is 60 or less, meaning if the stock price moves 1.00, your option moves .60 or less. It's pretty rare that SPY moves 1.00 in a day, much less a few minutes. Then there are commissions that you need to add on both the buy and sell side.

2) If your using options with less than 5 days to expiration, gamma can really take profits away if the price moves against you. If you don't understand gamma and what it does to option prices close to expiration, you should learn about it.

Bookworm is right. Another suggestion is to use strikes with deltas of 80 or more (they will be deep ITM) and expiration more than 3 weeks out.

Back test using OnDemand, it's better than back testing with thinkback or on paper. If your unfamiliar with OnDemand, go to YouTube and do a search on "option guru" "ondemand" and my video should appear at the top.

Finally, if your good at picking direction, look into trading futures.


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  #5 (permalink)
Experience: Advanced
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trading option intraday as you describe is realistic,

I trade the IWM, tight spreads low comm via IB, at the money, do not trade the current week, go for the next week out, ( current week has to much theta - loss of daily value ), unless of course you sell the options.

some indicator like GOM delta is very helpful, remember the writers sell the bid and buyers buy the ask, you can see all this intraday via the GOM delta ladder indicator, as always the first two hours of trading is all that matters and some movement in the final hour

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  #7 (permalink)
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I have traded the ES live and simulated almost every day for over a year now, up big many times only to give most back. My biggest problem is that I trade with an account to small for futures trading. Putting on a trade that makes money is no longer the problem for me. The real challenge at this point is position size, related to letting profits run. Trading 2 lots, preferably 3, gives you considerably more flexibility and will return larger profits in the long run. Most of my profits have come from 10-15% of my winning trades. So you must be able to manage profits in a way that allows you to let them run, just as hard as risk management (I think). OK i'm starting to go off on a tangent, SHORT AND SWEET COMMENT: I now trade SPY options, as well as a few others. This for me has been the answer to my problem. LEVERAGE WITH LOWER RISK. I can hold a position overnight now and sleep. My commission is only 1.50 on each side of the trade per option (could be better, but fine with me). 1/2 my trades I am out as a day trade, the other 1/2 swing for a day to a week, mostly 1-3 days. I am going to start a journal so I can journal my progress and hopefully find others that are trading the same. Can share and learn.

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  #8 (permalink)
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kburks View Post
I am going to start a journal so I can journal my progress and hopefully find others that are trading the same. Can share and learn.

If you go at time 38:30 of there is a comparison between trading ES futures vs spy options and on the slide there is also some comparison with the SPY. It looks like scalping the ATM options (weekly) makes better sense compared to using the spy. I look forward to seeing your trading on these options. (by the way I hope on TWS and not on TOS as in Italy – they wrote me “due to local regulations”!! - the latter is not available, even though, yes it is licensed in other …. European “Union” countries !! gosh! I thought our money going to finance the EU was as good as that of the others' and that all “EU citizens” were guaranteed as being equal and having equal treatment).
Anyway, this is another matter.

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