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I am starting to learn Day trade and start with SPY options using the Paper money. As I am step into the world of day trading, I want to learn how I can start looking at the option strikes/risk management and entry/exit tips. Any pointers would be appreciated.
I'm going to take the floor because, as I'm sure you've noticed, this is primarily a forum about futures trading and not so much about options trading.
My background is in options trading in the hedge area with future options and future contracts.
I have of course read through your first posting and there are already some questions that came up.
Question for you: What is your trading plan so far? Do you have at least some kind of idea of how you want to day trade SPY options and if so, what does it look like?
You are not obliged to disclose your plan completely, but it would make sense to show a little bit of it. In this way, there would be a first basis on which to work.
By the way: SPY options are expensive. Is your basic knowledge of options strong enough to start immediately at this level or can it also make sense to start with an options trading thing in which it can only be about cheap options in another futures market?
I ask this to maybe encourage you to train immediately with small money in a market really live and not just to fiddle around with paper trading.
Paper trading is one thing, but what you will never learn is how it really feels to trade with real money and lose and win and then have your psyche under control or not. This is only possible with a live account. I had to start in my training on options from the first day on with real money. That was a challenge from its best.
Theres a lot to unpack here. Could you reply with some more info on what you are looking to do / what is your goal? Are you just starting out and what to know what options are? Are you looking for tools, brokers, adn strategies?
In general, I like to play 0 dte SPY / SPX options, and enter a long for a reversal. I like to do 0dte to collapse all option price reaction to delta and gamma (in extreme cases). This makes the price more volatile (up and down) to changes in underlying price. However, since theta has already been severaly decreased, as it gets into the last 2 hours of trading even a winning OTM trade can go to 0 as the option quickly decelerates to fair value (which is most often 0)
Like I said a lot to unpack
For understanding options, theres a few basic and fundamentals to learns
- Basics (calls vs put, short vs long, risk exposure of both, out of the money vs in the money)
- Greeks (Delta, Gamma, Theta, etc.)
- Options fundamentals (open interest, volatilty etc.)
