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Daytrading AAPL Options
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Daytrading AAPL Options

  #1 (permalink)
software developer
Seattle, USA
 
Futures Experience: Intermediate
Platform: TradeStation
Favorite Futures: AAPL options
 
townsend's Avatar
 
Posts: 7 since Aug 2012
Thanks: 0 given, 4 received

Daytrading AAPL Options

One of the reasons traders are drawn to penny stocks is because, they're inexpensive, and with such a small market cap, they can move VERY quickly. If a penny stock moves up 10-20% in one day, that's considered good.

But I think I found something better. I've been experimenting with AAPL options. Unlike most options, AAPL options are VERY liquid, and see BIG moves every day. Every day, I see many 20-30% moves, and a couple of 50-100% moves. At least a couple of times a week, there are 200-300% moves.

Now I never try to pick up the entire move, in fact I've very very cautious, usually glad to scalp 5-10% with no draw down. This entails jumping in for just a minute or two. Since APPL options are the MOST liquid options in the world, I always get filled instantly.

Below is an example of a 45% move in just 37 minutes, from today. That's a 15 second chart. Actually, when trading, I use a 5-10 second chart. Or a 50 tick chart. Like I said, the whole trade lasts just a couple of minutes.

With my Tradestation account, my round turn commission on 1 contract, is only $2. So this can't be done with most accounts. Interactive brokers also offers these low options commissions. I'm sure there are others. But it can't be done with most accounts. For instance, if I tried this on My TDAmertrade account, the same trade would cost me $20, round turn.

I always trade out of the money options. I pick the highest price option under $3. So for example, with a $2.50 option, since each contract is for 100 shares, I'm only putting $250 at risk. Not bad really.

I've been at it a few months now, and so far, this seems to be a very viable strategy. Today I did 6 trades. 5 of them lasted only 1 minute, so in terms of this trading journal, I can't really post them as they happen. I can post them after the fact though. I'll post the log on my 6 trades for today.

My BIG problem right now is getting away from these 1 minute, no draw down trades, and getting in on some of the 50-100% moves that happen all the time.

Also, keep in mind this strategy is still experimental. Once I get it down, it's just as easy to trade 5 or 10 contracts at once.

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Last edited by townsend; June 3rd, 2013 at 10:07 PM.
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  #3 (permalink)
software developer
Seattle, USA
 
Futures Experience: Intermediate
Platform: TradeStation
Favorite Futures: AAPL options
 
townsend's Avatar
 
Posts: 7 since Aug 2012
Thanks: 0 given, 4 received


Oh-- I should mention that I am allowed to daytrade these options freely,
as long as a keep a minimum balance of 5k, in my Tradestation account.

Which is much better then having to put up 25k.

Here's this is a typical trade for me. I get in at just the right time. There, the gray vertical line shows an entry at 7:51, I enter at 1.75. I stayed in for only 2 minutes, getting out at 1.88 for a quick 7% profit.

But as you can see, due to my fear of draw down, I got out at the first sign of danger. Had I followed my indicator, I should have stayed in, for the full 25% profit. I feel pretty stupid, doing this over and over again.

PS: Those up and down arrows are drawn by the Tradestation platform using the Display Account Orders and Positions facility, so that's the exact path of my trade this morning.

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  #4 (permalink)
software developer
Seattle, USA
 
Futures Experience: Intermediate
Platform: TradeStation
Favorite Futures: AAPL options
 
townsend's Avatar
 
Posts: 7 since Aug 2012
Thanks: 0 given, 4 received

Here's a little bit on the strategy I use. Since I'm working with such a short time frame, (IE: 6 sec, 60 tick charts), open and close, don't matter. So, I got rid of them. Then I use a 20 bar average on the high and low. That's the gray cloud. Then the red and green cloud is just two moving averages, colored in.

But I get my real insights from Andrew's Pitchfork. The whole trick to using this drawing tool, is knowing when to use it, and when not to. See this example here. This is a 200 tick chart. That first pop up, and bounce down, off the top red line, tells me the Pitchfork is true. Then that little dip below the green cloud, where it turns red and back to green again is a good entry signal.

Buy the way, this is a AAPL chart from yesterday and today. Also notice, on the right hand side, the two swings up. The first one is bouncing off the top red line, and the second wave up, is bouncing down through the bottom green line. This of course, is easy to interpret as a break down in the Pitchfork channel.

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Now here's the same Pitchfork channel, on a 90 second chart. It covers the same period. Notice how the entry signal is not quite as clear, AND the two final upswings are along the top red line of the channel, and the down swing looks as though it's support, which I don't believe it is. Also, in the middle there, the high-low cloud breaks through the bottom green line, which ends up being a false breakout.

Thus, to my experience, Andrew's Pitchfork works much better on tick charts.

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Elite Member
Chicago, USA
 
Futures Experience: Advanced
Platform: TradeStation, NinjaTrader, Market Delta, TOS, StreetSmartEdge, OptionXpress
Favorite Futures: ES, currency futures, options, stocks
 
Posts: 183 since Dec 2010
Thanks: 283 given, 248 received

Any updates on this strategy? Are you still using it?

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