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Using Options for Swing Trading


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Using Options for Swing Trading

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  #151 (permalink)
Market Wizard
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The month isn't over so I don't want to jinx myself, but as it stands right now, I have gotten a little better each month for the past 7 months. Potentially three straight months of profitability if everything stays upright for the next ten days.

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  #152 (permalink)
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Hi Bermudan Option,

Thank you for keeping this journal. I have a question regarding your trade entry methodology I hope you could answer.
  • Do you generally select ITM, ATM, or OTM options?
  • Do you select your strikes based on specific parameters of the greeks, OI, volume, price?
  • In a less liquid underlying do you opt for outright purchases or still verticals? (considering the 'double' bid-ask spread of the option you need to buy and close)
  • How often do you trade the outright calls or puts vs verticals. (the verticals can cap alpha and/or do not capture full value due to timing?)

Thanks.

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  #153 (permalink)
Market Wizard
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Cogito ergo sum View Post
Hi Bermudan Option,

Thank you for keeping this journal. I have a question regarding your trade entry methodology I hope you could answer. Thanks.

Good questions

  • Do you generally select ITM, ATM, or OTM options?
    • ITM options always
  • Do you select your strikes based on specific parameters of the greeks, OI, volume, price?
    • First and foremost is the spread. If the spread isn't tight, there is a high likelihood of slippage and of me getting stopped out before the underlying breaks resistance/support so I always want a tight spread, no more than 1-3 cents apart most times. Next most important thing is the delta. I want a delta of .85 or greater unless the PPS is very big. That wayI can set my stops just like I would for the stock itself without worrying about theta or the other greeks
  • In a less liquid underlying do you opt for outright purchases or still verticals? (considering the 'double' bid-ask spread of the option you need to buy and close)
    • I use verticals for +$100 PPS stocks like AMZN/AAPL. For the most part nowadays, I steer clear of less-liquid options. I generally use (diagonal) verticals when I expect the market to move sideways for a while before it moves higher/lower. Now would be a good time for example, as I would expect the SPY to retest $174 and then consolidate or fail on a quick breakout
  • How often do you trade the outright calls or puts vs verticals. (the verticals can cap alpha and/or do not capture full value due to timing?)
    • Like I mentioned before, I use verticals when I expect sideways action. Also another reason is if the IV is very high but I don't want to pass up on a chart. I would buy some ATM options and then sell some DOTM options for profit since the IV is so high.


Anyways, today is sucky so far. Stopped out of all of my positions except STP. Down like $800 or so intraday. No new positions on the chopping block right now, might throw a spread on tomorrow or after the weekend.

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  #154 (permalink)
Market Wizard
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Grabbed some JDSU on a deep intraday pullback:


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  #155 (permalink)
Market Wizard
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Stalking Alcoa and looking to buy the next dip on a symmetrical triangle consolidation -> breakout


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  #156 (permalink)
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Bermudan Option View Post
Anyways, today is sucky so far. Stopped out of all of my positions except STP. Down like $800 or so intraday. No new positions on the chopping block right now, might throw a spread on tomorrow or after the weekend.

Actually, I misspoke slightly here. I was not stopped out of my ATVI position so I am still sitting in it around breakeven:


FWIW, I like that my entry in ATVI has allowed me to withstand the recent volatility (for the near term at least)

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  #157 (permalink)
Market Wizard
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Stalking NVDA.


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  #158 (permalink)
Market Wizard
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Filled on NVDA



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  #159 (permalink)
Market Wizard
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Kinda stalking SD as well, but looking for price to go a bit lowe


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  #160 (permalink)
Market Wizard
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Stopped out of NVDA. Just twiddling my thumbs at the moment. Nothing doing for me currently.

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