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Day Trading Options


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Day Trading Options

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  #1 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

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

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  #2 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

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

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 GoldStandard 
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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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 MyTraderAdvisor 
The Valley ANGUILLA Caribbean
 
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Thanks ESFXTrader.
What is your "very safe Diagonal Spread Trading" ?

I believe only in profits, not in prophets.
Follow me on Twitter
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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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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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ESFXtrader
West Coast of Florida
 
 
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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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 shodson 
Quantoholic
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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.

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ESFXtrader
West Coast of Florida
 
 
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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.

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 zeller4 
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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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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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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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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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GOOG offered a nice opportunity to go long or for those of us who like options, buy call options at the close of 4/25/11. Using my CCI countback method, you will see just how successful the trade has been. Although I am showing more than on strike price and it is obvious the lower cost would have been the best when trading with the same money, I choose the option closer to the money for higher % win rate and certainly have no regrets, but I did not get out at the high of $13.60, using the 10 min count back bar on the CCI, took me out at $13.50 @ 10:40AM. Try and beat that with any other system. See the charts to see the entry and try on demo and perfect what I love.
WK

 
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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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ESFXtrader View Post
GOOG offered a nice opportunity to go long or for those of us who like options, buy call options at the close of 4/25/11. Using my CCI countback method, you will see just how successful the trade has been. Although I am showing more than on strike price and it is obvious the lower cost would have been the best when trading with the same money, I choose the option closer to the money for higher % win rate and certainly have no regrets, but I did not get out at the high of $13.60, using the 10 min count back bar on the CCI, took me out at $13.50 @ 10:40AM. Try and beat that with any other system. See the charts to see the entry and try on demo and perfect what I love.
WK

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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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The following are examples of the new thread I intend to start soon:

UAL @21.66 Buy @ $1.53/2.44/.91 Sold @1.74
UAL 110618C20 3.41 3.25 3.30 70 today
UAL 110521C22 1.40 1.37 1.40 666 today

PAY @$53.50 Buy @ $4.37/7.47/3.10 Sold @ $4.69
PAY 110618C48 8.20 7.90 8.40 53 today
PAY 110521C52.5 3.50 3.40 3.60 214 today

SLW @$39.77 Buy @$3.28/5.51/2.23 Sold @3.65
SLW 110618C36 6.30 5.95 6.05 39 today
SLW 110521C40 2.57 2.47 2.50 1,751 today
You will see columns of last, bid, ask, and volume following the symbol of each trade.
The object is to buy ITM options futher out and sell ATM or OTM options to cover much of the cost of the option purchased. Two ways to win. ITM option has a higher Delta and moves more quickly with symbol price in my expected direction. Theta causes the sold option to lose value more quickly than the option with more time. I close most trades 3 to 6 days after opening with 6% to 12% gains. The highest has been 40% in under 3 weeks. The above trades were held only 2.5 hours, 2, & 3 days for 11%, 6.35%, & 9.94% including the cost of commissions. These are very low risk trades and are best not taken before news or earnings report of traded symbol. Out of the over 50 trades taken, only 2 have not been winners.
As noted, I have closed several on the day opened and most never go in the red more than .10.
These are the last 3 trades taken. Hope I can get to more on this soon. This should wet your appetite.

 
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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

Private Message: "Just read your options thread.. How would you recommend me learning to buy/sell opts? Any good resources?
Have you ever thought about teaching someone?"

I have not only considered it but tried to teach some family members and others. The problem is that they must truly want to learn and willing to listen to their dad, brother, and/or uncle. I have also tried to teach some in our church and where I worked. Most won't take the time and get comfortable with the charts to really give themselves a chance to learn. One needs to understand charting, stocks and/or ETF first. Then they can learn options. If you google option trading and variations of that, you will find many sources to learn option trading. I learned from Optionetics at a 2 day seminar. I have repeated it free as we have that right. I love to buy ITM options a month out and sell ATM options of the current month to pay for much of my cost. I seldom go wrong and frequently sell in 1 to 3 days with 6% to 12% return. That is not bad with my consistency and the very low cost of commissions at Trade Station. The commissions must be taken into effect, as they can add up quickly at some brokers. I pay $1 per contract, so my cost is $4 per contract per trade. You do know that if you buy an option, you must sell it; and if you sell an option, you must buy it back. So, a spread is the purchase and sell of an option at the same time. Generally, one closes both sides of a spread simultaneously, but that is not necessary. The way my trades work, the two options move together for a while, especially when the market moves against my plan. I have seen the price move $4 against me and the options were in tandem. Then it turned my direction and quickly made my a nice 12% return in only a few more minutes. Getting back to legging into or out of a trade. You can buy back the sold option first and sell the one you bought at any time. A good time to do this is after the price goes against your trade. The price of the short option or sold option is low and can often be bought for less than half of its credit to you. Then, as the price of the stock/ETF moves in your direction, sell the long option or bought option. You can see great success using this method with smaller accounts, where you hold the trade overnight and day trade to leg out of the spread, or if you prefer, leg into the spread. I use the CCI method I have described in the TF, FX, and Option threads. Hope this gives you a start. It works for me. www.optionetics.com has a lot of helps. Good luck and good trading.

WK

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  #15 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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https://www.tradestation.com:443/newaccount/getstarted.aspx?offer=0062AAJI&direct=1

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  #16 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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Another Private Message: Re: Options
I want to learn!

I checked out Optionetics.

NFLX @227.67on 4/11, I opened a Diagonal Put spread @$5.93/20.91/14.98
Buy:NFLX 110618P230 and Sell:NFLX 110521P225
Had you closed near the open the following day as I did, the trade was at $6.40 and had a gain of 7.2% including commissions. It Sold for $6.20 on 5/2.
NFLX peaked $254.98 on 4/25/11 and the spread trade was only at a loss of .45 to .80 max at $5.50 to $5.15 spread. And from $6.95 to $7.05 (about 17% gain) today with the price of NFLX up almost $12 against the trade. What other trade can you put on where the trade goes against you $27.31 and you lose only a max of $80 a contract.

Check out LULU in which I also placed a Diagonal Put spread with the price at $89.89 as seen on the screen shot below. The spread was sold for a 3% gain before the big move against my trade. Now the price is at $98.80 and the spread is at $2.75 from $3.61 purchase. With the price $8.95 above my put option purchase and therefore against my trade, the spread is only at a loss of .86 or $86 per contract.
Hope this helps you see just how well these diagonal trades work.

WK

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ESFXtrader
West Coast of Florida
 
 
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This VXX spread is a credit spread I picked up and closed today for a credit of .22
Although the margin of $100 could be considered an expence, it really doesn't work like that on the diagonal spread. Since this was a credit, there was no up front cost, and therefore, it is hard to figure the % gain. The main thing here is that you add the .04 to .22 for a total gain of .26 or $26 per contract traded.
The spread was put on for a credit of .04 .04/$1.00/1.04
The spread was placed on 4/6/11. I expected the VXX to continue plumiting after the bounce up near the 31EMA.
The margin is $100 (100X$1.00-difference between stricks) per contract, as these are call options and the long option, as seen below, is at a strike price of $26 and the short strike price is at $25, which is .30 in ITM when the trade was placed. The trade worked perfect and the short option lost money quickly, as it expires tomorrow, while the long option has another week.
This is another way to use the diagonal spread trades. I have not had one of these fail to work. They have been low credit from this .04 to .30 and worked the same. To get the hang of these, copy the option chain as I did and watch the price of trades you expect would work and see for yourself how well it does. Those with smaller accounts need to consider the margin.
After you understand all I have written and see how the price of options move with the time laps and price of stock, then you can trade live for a nice profit. Good trading. Hope this helps.
WK

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 Tiberius 
Market Wizard
Coos County New Hampshire
 
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It's great to have diverse threads on futures.io (formerly BMT).........

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ESFXtrader
West Coast of Florida
 
 
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http://topgunoptions.com/blog/wp-content/uploads/OPCL-FINAL.pdf

This consicely describes some of what I learned with Optionetics.
The URL is a very thorough discription of the many types of option trades, what to look for in the markets, and how to always manage your money with low risks.
The following is a glimps of what is inside:
Planning: The Planning Guide
Purpose: This planning guide is intended to give a trader a logical sequence for trade
planning. Reference the Top Gun Options ’ Glossary for specific terminology.
1. Target:
a. The underlying asset that is being considered.
2. Strategic Mindset.
a. Bullish, bearish, neutral or volatile.
b. Determined by fundamental analysis, technical analysis and volatility (VIX
and IV vs. HV). .........


http://topgunoptions.com/blog/
or
http://topgunoptions.com/tgo


Matt Buckley - a.k.a. Mr. Broken Wing Butterfly - or as he likes
to describe himself: 'The Knuckle Dragging Option Trading Caveman' -
just posted a new trading video on what he's doing right now with options
to generate 16% a month.
His story is found on this long video, but it does not describe his technique. If you sign up, you can get his emails that will offer more info later. I am not affiliated with him and have not joined his service, but have downloaded the “free” Options 'Pocket Check List' seen above and thought some of you might be interested in doing the same. I thought it necessary to include this info if I gave you the access to the free check list. It can help learn and perfect your trading no matter what type of option trader you are or become.


This is the response for the request of the Opition Pocket Check List:


Hi Fellow Trader,

Thanks for your interest in getting my OPCL (Options Pocket
Checklist).


I put a lot of time and effort into this, so you should
definitely print out a copy and keep it handy as a reference.

(It is modeled after the same pre-flight checklist I used to
refer to before getting in a $50M F/A-18 Hornet and launching
on a combat mission

Trading is Combat - I always say...And that is especially
true with Options.

This Options Checklist can save your life if you use it...

Ignore these key concepts, and you will get killed in the
markets.




To your success !!!!!!!!
WK

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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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The last screen shot should have looked like this one below.

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  #21 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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This is another example of my Diagonal spread trading. It is on the SPY ETF placed yesterday and was never in the red. Bought at $2.00 per contract and sold today at $2.20 for a 7.14% gain. You may ask how the gain was calculated. 2.20-2.00=.20-.04(cost of commissions)=.16X100(#of shares per contract)=$16 divided by $224(total cost inc commissions)=7.143%.
That is how I always calculate my gains or loses.
In this trade, the short term short option is expected to lose value quickly because it has only till Friday till expiration.
Although I have not started the Diagonal Spread Trading Thread, I have shown you my trades and how I expect them to be winners and they continue to be just that.
I hope you are seeing just how successful they can be to trade.
If you like this type of trading, practice and let me know how it is going.
Good Trading.
WK

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 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
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All / @ESFXtrader:



The Big Mike Challenge #2 starts in June and is about Teaching Trading Methods. If you wish to participate, please read the above link.

The prize is an iPad 2.

Mike

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 Bermudan Option 
Chicago, Illinois
 
Experience: Intermediate
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Cool thread. I am kind of surprised there is not more options actions on the website because a lot of retail traders have ventured into option trading based on what I've seen in the media anyways

Visit my futures io Trade Journal
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  #24 (permalink)
 Big Mike 
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Bermudan Option View Post
Cool thread. I am kind of surprised there is not more options actions on the website because a lot of retail traders have ventured into option trading based on what I've seen in the media anyways

futures.io (formerly BMT) needs help building our non-Futures subforums. Since I am a futures trader, and started the site, it focused primarily on futures. I ask for your help to build out our equities/options areas.

You may also check here for a recent discussion on OTM credit spreads:



Mike

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sram
detroit mi
 
 
Posts: 1 since Mar 2011
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can you give more detail on
using the count back method on both the option and the SPY charts

 
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  #26 (permalink)
Jon Lexington
cagayan de oro city
 
 
Posts: 1 since Aug 2011
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One factor which i observe that catches traders up constantly is understanding their limits. You will find occasions when it's most likely smarter to step from a trade or otherwise trade whatsoever.

Sometimes the very best favor that you can do on your own would be to take a rest.

It does not matter what you are or what type of buying and selling you need to do. You will find likely to be occasions if you want to step away and take a rest from things. This could happen following a bad trade, a large loss, which after an excellent performance. It can benefit you receive things back to perspective. Additionally, it enables to have an chance that you should take a look at trades, and study from any mistakes or plans that you simply think set you back over time.

It is simple for traders to obtain swept up within the action.

Lots of amateurs end up getting taken away within the wave of enthusiasm. The buying and selling levels that include winning are simply as strong because the pull of stress that may accompany a loss of revenue. It can be the person trader to check out themselves within the mirror and admit when passions and feelings, instead of good sense, are in the helm.

Huge market actions like individuals which come about the waves of spiking costs are frequently irresistible. Unfortunately these occasions of high unpredictability can sabotage careful buying and selling plans. Keep in mind that there's no circumstance to which it's smart to go in a trade with no solid plan which includes:

- specific entry ways according to your analysis

- specific profit exit level

- specific loss exit level

Even at the very best of occasions it may be a workout in persistence and risk ability to tolerate trade. You won't want to muddy the waters by buying and selling throughout extreme market occasions before complete macro picture can be obtained. A good example of the type of action I'm speaking about is in accordance with the stress over debt issues. When news is trickling in 24 hrs each day from Europe and also the U . s . States, or whenever a large rankings agency decides to reduce a AAA credit score over the past weekend, you can be certain that there's an atmosphere where marketplaces can gap using your stop prices or make you very vulnerable. Buying and selling in futures is dangerous enough without adding that much cla of tension.

Each time you trade you need to request yourself what's motivating you.

Before you decide to enter any type of trade you need to request yourself what you're searching for. Have you been carrying out a solid plan according to cautious and rules? Have you been ensuring you're only using risk capital? Is it possible to pay the loss when the market moves against you? Have you been just buying and selling to "be on the marketInch? Comprehending the solutions to those questions and being honest on your own is essential. These bankruptcies are not just alerts to pay for lip-plan to. You will find substantial perils associated with loss in most buying and selling, which explains why you need to know and respect your limits. It is usually ok to sit down things out. Nobody ever manages to lose money by remaining about the sidelines and from trades inside a volatile market.

Best Trades for you,

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ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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At this time, I trade more futures than options, but one of my favorite option vehicles to DAY trade is SLW. It has weekly options which can be bought for pennies. Had you bought the 36 Puts as indicated, and the charts show the setups and trades, you would have more than doubled the cost of each trade. At 9:33, the cost was aprox .17 and could have sold for aprox .40 at 10:40. Then re-buy at 11:15 for aprox .22 and sell at 1:15 for .57. 20 Contacts w/commissions at TS =.18 X 100 X 20 = $360 and sell for $800-$20 commissions. Second time cost $460 and sell for $1140-$20 commissions. Total net profit for the two trades would have been aprox $420 + $660 = $1080. Not bad for just 2 trades and so little risk. Continue to watch the SLW and other weekly option stocks at a low cost where you can buy options for very low cost. As long as they have decent price action and you trade my system or one you like better, you can see for yourself the potential each day. Good trading.
WK

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  #28 (permalink)
 aljayjr 
san diego california
 
Experience: Beginner
Platform: TS
Trading: stock options
 
Posts: 3 since Feb 2012
Thanks: 4 given, 4 received

ESFX,

You seem to have day trading options down. I have experience with options, where I lack experience is recognizing when price action is going to move in a certiain direction. Your charts you have provided show you have this down. How can I go about getting this knowledge of price action through technical analysis so I can then buy options to capitalize on the move.

Any help would be much appreciated.

Best
Al

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  #29 (permalink)
 Maisie 
san francisco
 
Experience: Beginner
Platform: Interactive Brokers
Trading: stocks & options
 
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Posts: 146 since Dec 2011
Thanks: 99 given, 85 received

nice to see someone else who has discovered day trading options. that's my strategy now. i don't do anything apart from substituting the one strike out of the money option for the stock itself. that's it. the volatility is very good and gives just crazy returns sometimes. i can usually count on at least 5%, then more typically 10-15% and sometimes, to infinity and beyond. i have printed out literally hundreds of charts of the equity and it's sister option and measured the moves. while the option prices don't mirror the equity exactly, it's good enough. if you can daytrade the equity, you can daytrade the option. the key is forcing yourself to limit in no higher than the midpoint of the spread. chase up towards the ask and your trade is DOA.

i'm going to study your spreads. i haven't a clue what an (option) spread is at the moment, but see that this could be good. i ordered the options home study class from schaeffers for 99 bux so have to hit those DVDs.

ty for this thread!

Du sublime au ridicule, il n'ya qu'un pas. ~Napoleon Bonaparte
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  #30 (permalink)
 Big Mike 
Site Administrator
Swing Trader
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Posts: 50,008 since Jun 2009
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On Wednesday, October 10th @ 4:30 PM Eastern US, Carley Garner will be presenting a webinar on futures.io (formerly BMT) which covers Options Trading (specifically Futures, but it will be a broad overview). I've asked Carley to put together a multi-part webinar, so this is Part 1 and will just be "Basics - 101".

You can find more info here:


Mike

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  #31 (permalink)
 gtrader 
Philadelphia
 
Experience: Intermediate
Platform: SierraCharts, Ninja
Broker: Optimus (Rithmic)
Trading: Futures (ES, TF) Options
 
Posts: 10 since Jun 2011
Thanks: 19 given, 6 received

ESFX,

I see that you use Tradestation for trading options. How do you find it in terms of flexibility with making rapid changes to existing orders? I am looking for an options trading platform where I can adjust my oco orders in real time and update them quickly. So, if I want to change my stops and targets quickly, I just update the fields without canceling my current order, hit submit and it's done and the order is updated. It should also be capable of complex oco orders. So, if I have 10 contracts on a trade, I can set it to sell 5 at my first target which will then automatically trigger a new target/stop order for the remaining 5. This is for fast day trades. ThinkorSwim does this but their software crashes continuously for me. Anyone know of any other good alternatives?

-Glenn

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  #32 (permalink)
 zeller4 
Florida
 
Experience: Intermediate
Platform: NT7
Trading: CL, NQ, NG
 
Posts: 469 since Jun 2009
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Glenn,

Check this out. They have a paper trade demo which works with different strategies. (Not sure how the datastream works.) I've only started so not too sure on all the features of their website/program...

https://futures.io/www.trademonster.com

Market News, Options Education, Trade Ideas | optionMONSTER

HTH, Kirk

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  #33 (permalink)
 DaveTrading 
Barcelona, Barcelona, Spain
 
Experience: Intermediate
Platform: NinjaTrader, TWS
Broker: IB - AMP/CQG
Trading: Futures, Options
 
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Posts: 40 since Oct 2010
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gtrader View Post
ESFX,

I see that you use Tradestation for trading options. How do you find it in terms of flexibility with making rapid changes to existing orders? I am looking for an options trading platform where I can adjust my oco orders in real time and update them quickly. So, if I want to change my stops and targets quickly, I just update the fields without canceling my current order, hit submit and it's done and the order is updated. It should also be capable of complex oco orders. So, if I have 10 contracts on a trade, I can set it to sell 5 at my first target which will then automatically trigger a new target/stop order for the remaining 5. This is for fast day trades. ThinkorSwim does this but their software crashes continuously for me. Anyone know of any other good alternatives?

-Glenn

Hello @Glenn,
With Interactive Brokers it’s easy to have your trades on screen with live orders and change the Price to another you want to send, and when you want just click the update button.

Also make complex oco orders and even choose to use them as default.

IB is very cheat with options. The trick is that they charge you when you modify a live order. At this time I have calculated that my average cost is less than $0,80 for trading more than 1 thousand options. I trade an average of 5 options each time and modify 1 executed order every 2 trades.

I think is may be the best platform for execution and for available option liquidity, but you need something else for charting and also if you want to analyze greeks or complex strategy. TOS is the best relation quality/price for that. OptionVue is the more complete (and expensive).

Hope this help.

DaveTrading.

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  #34 (permalink)
 gtrader 
Philadelphia
 
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DaveTrading View Post

The trick is that they charge you when you modify a live order.

Thanks guys.

How much do they charge when you modify an order?

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  #35 (permalink)
 DaveTrading 
Barcelona, Barcelona, Spain
 
Experience: Intermediate
Platform: NinjaTrader, TWS
Broker: IB - AMP/CQG
Trading: Futures, Options
 
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gtrader View Post
Thanks guys.

How much do they charge when you modify an order?

Commissions depends on the exchange your order is send to (IB use a proprietary algo call SMART to choose the best exchange to fit your need -execution price). So each trade is… a "commision surprise!" I pay from 2 cents for 2 options on AAPL or GOOG to more than $1 other times. That’s why I follow my average commission because each trade is different and not "commission representative".

Cancellation work same way, depend on exchange plus IB algo. You could find more info here:
https://www.interactivebrokers.com/en/p.php?f=otherFees

But in fine I found that my option commissions including cancellation fees are well below $1 per trade. I also suppose it will lower as I'll execute more size on each trade.

DaveTrading

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  #36 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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Diagonal Spread Trading
For those interested in diagonal spread trading of options, here are two trades opened and closed this past week. When placed properly, there is little risk and neither ever went in the red.
CAG spread was purchased when price was at $27.95: bought $27 Jan calls and sold $28 Dec calls for only .79 and sold for 25% gain in two days.
CMCSA spread was purchased when price was at $36.36: bought $36 Jan calls and sold $37 Dec calls for only .79 and sold for 12% gain in three days.
One can easily make several hundred dollars per month on similar trades month after month.
Good trading.
WK

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  #37 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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As for making rapid changes in Trade Station Platform, I only wish it were possible for spread trades. It is easy for single option trades, but spreads must be cancelled and reopened at the new desired price, which can be time consuming, although, I do have it down where I can get it done quickly when needed. I have never had TS crash in all my years of trading.
WK

 
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  #38 (permalink)
 zeller4 
Florida
 
Experience: Intermediate
Platform: NT7
Trading: CL, NQ, NG
 
Posts: 469 since Jun 2009
Thanks: 1,401 given, 402 received

Hello ESFXtrader,

did you ever try OptionMonster?

just curious...

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 Chipmunk 
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ESFXtrader thank you for the information.

Do you buy Jan calls and sell Dec calls at the same time or buy today and sell tomorrow? Because in the beginning of your thread I read that you buy call option and later sell call option.

What you mean by "When placed properly"? What would you recommend to look at when placing a trade?

Please recommend inexpensive stock options having enough action and good spreads during a day. I mean cheap stocks in a price range of $10-$20 so that ITM call/put options would cost about $0.50 - $1 but having the same trading power like expensive stocks - Google, etc with good volume, good spreads and so on.

Hey zeller4, I am trying demo of their trading platform. Looks not bad. Though read bad reviews about their customer service. Also planning to try OptionsExpress.

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Lepanto
Monrovia, California USA
 
 
Posts: 8 since Jul 2012
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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.
Question 2: How many days to expiration would still allow me to enter the trade?

Thanks again!

VR

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  #41 (permalink)
ESFXtrader
West Coast of Florida
 
 
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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.

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

 
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  #42 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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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.

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  #43 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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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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 TheSeeker 
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)
ESFXtrader
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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

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  #46 (permalink)
ESFXtrader
West Coast of Florida
 
 
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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.

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  #47 (permalink)
Lepanto
Monrovia, California USA
 
 
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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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 MyTraderAdvisor 
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Is there a software you recommend to study this ?

I believe only in profits, not in prophets.
Follow me on Twitter
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Smcdaniel5507
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Lost risk high outcome, that is the traders dream. While trading on my own buying and selling from the stock market by myself I have seen, lost, and won a lot. I also tried binary options trading, forex trading, trading advisors. after doing some research and learning from a lot of person experience. I decided to go back to binary options, the company Ive been working with for the past 5 months have been so helpful and dedicated to helping me trade im never alone. I found this way to be the best low risk high outcome options for me. Each company promises different offers and bonuses I actually received them from this company, I got an ipad3 as well as daily emails and phone calls from my personal account advisor.. the company is called ihoptions i would recommend it to all traders looking for low risk high outcome!! happy trading!!!!

 
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  #50 (permalink)
Lepanto
Monrovia, California USA
 
 
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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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  #51 (permalink)
 Cloudy 
desert CA
 
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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
Took screenshots.

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.

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ESFXtrader
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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.


Lepanto View Post
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.

You have the right idea and you might even be profitable on these trades.


Lepanto View Post
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

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.

Good Trading.
WK

 
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  #53 (permalink)
Lepanto
Monrovia, California USA
 
 
Posts: 8 since Jul 2012
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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.
Not bad.
Again thanks for the tips. I hope you're fully recovered from your bout with the flu.

 
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  #54 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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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.
Good trading.
WK
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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  #55 (permalink)
 saikodi 
Seattle WA/USA
 
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ESFXtrader View Post
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.
Good trading.
WK
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.


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.

What do you think?

Thanks

 
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  #56 (permalink)
 Big Mike 
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Carley Garner will be back on Monday, February 25th @ 4:30 PM ET for a webinar on Options 201 - Spreads and Strategies. Details here:


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  #57 (permalink)
rxalex
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whats the best way to learn this strategy?

 
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  #58 (permalink)
 Wagtail 
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Hi ESFX,

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.

Regards.

 
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  #59 (permalink)
 opts 
NW Florida
 
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Was looking for the CCI count back method description as well. You can take something from the screen shots but other info would be nice...

Thread dead?

 
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  #60 (permalink)
ESFXtrader
West Coast of Florida
 
 
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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.
WK

 
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  #61 (permalink)
 Maisie 
san francisco
 
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i have been daytrading weeklies for 2 yrs. just make sure u keep to a tight spread, 2% or less. and you need liquidity. often these two do not go hand in hand.

these options can blow up in yr face, esp short side of spread, when u may feel u bot yr protection (long side) from the girl scouts rather than the mafia. be careful.

Du sublime au ridicule, il n'ya qu'un pas. ~Napoleon Bonaparte
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  #62 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

Where have all the traders gone, where have they gone?
Is there anyone taking a screen shot of options' pricing (as I once suggested)? If so, try it on fast moving stocks with options (with strike prices at increments of $1)? Consider buying (out of the money) OTM options at a ridiculously low price of just pennies. A list of some great Symbols to check out are included on a screen shot. I am also including a screen shot of Time & Sales of FAS and IBM. These are all CALLs. It works the same way on PUTs.
No one will ever get it perfect. If you had on Friday on the FAS, in just 4 trades you would have multiplied your original investment more than 4639 times less commissions. Note that the highest price for an option paid was .15.
If you had bought 20 contracts at $12 each=$240 risk that moved to a high traded of $34 or $680. With $679, you could buy 97 contracts at $7 each which moved to a high of $20 or $1940. With $1936, you could buy 176 contracts at $11 each = $1936 which moved to a high of $25 or $$4400. With $4395, you could buy 293 contracts at $15 each or $4395 which move to a high of $38 or $11,134. The screen shot shows just what I have described. This is just one symbol on one day. The best moves comes on the last day the contract trades, be it weekly or monthly. Next best day is the previous day, and so on.
Look at the IBM chart of 185 calls and see that the option price of 4 cents moved to .40.
If you have never considered trading options, maybe now is the time.
Hope this helps and good success in all your trading.
WK

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  #63 (permalink)
 saikodi 
Seattle WA/USA
 
Experience: Advanced
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Posts: 27 since Oct 2012
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Well its easy to show after the fact but its difficult to pick before hand. Also, primarily it depends on what the indexes are doing. If the indexes are rallying like crazy, sure chances are the stocks you picked will go up like you illustrated below. But when the indexes are not, then it is difficult to pick them.

Howeve, if you do have a way to pick these Friday morning, let us know and I will be the first person to try them out. Better yet, the next few Fridays, post a few trades in the am and lets see what happens by end of day. If you have 60% accuracy, that should work I guess.

 
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  #64 (permalink)
 sandptrader 
Valdosta, GA. U.S.A
 
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hello ESFXtrader....could you post the IBM 180 PUT Strike price chart and also the Range for the strikes prices for Friday 11-22-13 just like you did in your last post.
I do not have access to the Option Strike price charts like i use to as i was also heavy into this type trading.
I am still in search of a platform that allows me to view these Option Strike Price charts for a particular Strike as they are very useful when comparing them to the Underlying Chart.
Thanks in advance.

 
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  #65 (permalink)
 sandptrader 
Valdosta, GA. U.S.A
 
Experience: Advanced
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Posts: 498 since Sep 2010
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here is the best i can do for free offerings to show the IBM NOV week5 185 PUT Chart and the 15 min IBM Underlying chart with Divergence that occurred Wed 11-20-13.
This option will expire on 11-29-13 so it would have been a good trade for the last few days.
the Range since Wednesday was very close to Low of $100 and by Friday a High of $ 500.
This is the type trading i will be moving back into along with what i am already involved in.
i just edited posting the 180 Put Strike price chart with range of $ 21-$158 for friday.

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  #66 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received


sandptrader View Post
hello ESFXtrader....could you post the IBM 180 PUT Strike price chart and also the Range for the strikes prices for Friday 11-22-13 just like you did in your last post.
I do not have access to the Option Strike price charts like i use to as i was also heavy into this type trading.
I am still in search of a platform that allows me to view these Option Strike Price charts for a particular Strike as they are very useful when comparing them to the Underlying Chart.
Thanks in advance.

For your information, the past or expired options are no longer available come Sunday and only the current weekly or monthly option chain is available to view and most of them do not yet have much action and certainly would not work for trading last week, as the price action of the underlying stock or ETF would be far greater than the action of the option. Only those about to expire move in step with the stock or ETF.

I will certainly show some trades in the future. If you ever plan to try this trading, practice and see how you do. Use a demo account or paper trade.
Good trading. More later.
WK

 
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  #67 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

For those interested in this thread or trading options in general, I thought I would post some info that may help you see just how powerful trading options can be. Certainly, FX and Futures trading offers good leverage on a trade and for those outside of US, FX offers even more, but for all that leverage, there is also all that risk. In option trading, where one buys the options, the risk is only the amount in the trade and day trading options with more cost than pennies, which trade with volume, can certainly be closed quickly, avoiding much of the loss of the investment. Some brokers offer trailing stops on options. I wouldn't lose more than 40% on trading options $1 or more. That way, one winner can cover any loss. The best option price moves come in the last days before option expiration. Some of these screen shots show option moves a week before expiration. These same moves in the price of the stocks this time late this week offer much bigger moves, as you would expect.
You can see that the first 3 screen shots are of AAPL options. AAPL was being bought throughout the day and the call options continued to rise in value. Note the 2nd screen shows 8 OTM strike prices that moved up considerably during the day. See low to high. It also shows the volume. All these AAPL screen shots are from 11/29 and one week before expiration. I hope you are beginning to see the possibilities. I continue to perfect my system of picking which options to buy and it is working well now. If you have a system that works, the opportunities are endless, especially near expiration of the options and on news events. More on that later.
Good trading.
Remember that it is very nice not to be required to go to work because you can trade for a living. What a joy.
WK

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  #68 (permalink)
Vunhat
Thailand
 
 
Posts: 1 since Dec 2013
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Thanks ESFXtrader. I like your strading style a lot. Hope to learn more from you.

 
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  #69 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
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Here are some option trade opportunities which offer the results I look for in these trades. The moves vary from a double to ten fold and between. Check the price action on either the charts or the Time & Sales. Although I haven't caught some, I catch enough to do well. There are plenty more just like these. The surprise was the MSFT trade that someone suggest I check out and it turned out great. Every week you will have opportunities just like these. The moves do not need to be huge to get a double. A $20 contract can quickly move to $40 with a .40 move on lower priced stocks and that happens all the time.
Hope you are starting to see just how powerful this system is and either practicing or screen coping to see results.
Good trading.
WK

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  #70 (permalink)
 dnkhoward2 
Dover, Fl
 
Experience: Intermediate
Platform: NinjaTrader 8, Oanda
Trading: YM, Currencies
 
Posts: 158 since Mar 2013
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Hi ESFXTrader,

I traded options for about 4 yrs before switching to futures in 1/13. I used optiosxpress. Their platform sucks. When I switched to futures I started using Ninja. I would really like to use Ninja for charting the stock. I haven't figured out which broker I should use or which data feed I should use for Ninja on the equity side and not pay a ton of money for it. Any suggestions?

I like what you are doing here. Keep up the good work. Like you are saying, lots of good opportunities if you can find something that is about to pop on expiration week. Are you just looking for the highest volume or lowest spread on OTM options?

I see you're from the west coast (Fl). I am from Brandon. I am in NC now but I will be headed back to Fl next year.

Have a nice weekend.

 
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  #71 (permalink)
ESFXtrader
West Coast of Florida
 
 
Posts: 505 since Jul 2010
Thanks: 56 given, 2,284 received

How many of you caught some of this OIH trade.
Check out what one trader did on the last screen shot.
The entries on the Puts have been great.
Hope you are getting yours.
Good trading.
WK

PS Thanks for all those who support this forum and are part of the Elite. This is an awesome place to hang out and see continued posts and downloads of fine traders.

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  #72 (permalink)
TGoat
Las Vegas NV/Clark
 
 
Posts: 13 since Oct 2014
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Interesting thread. Just curious, where did you buy your crystal ball?

 
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  #73 (permalink)
 Big Mike 
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