Automated trading of futures vs options

Discussion in 'Automated Trading' started by Joel Reymont, Nov 11, 2006.

  1. Folks,

    Pardon a newbie question but what are the pros and cons of automated trading of _options_ vs. futures?

    From what I read it seems that most options trading is discretionary.

    Thanks, Joel
  2. rosy2


    automation of option trading is probably more important that futures. for every future there are 20 or more options trading on it. how can you possibly be aware of them and there relative values?
  3. Maybe I should ask a more general question...

    My first and only trade ever was a directional play on AOL when they announced unlimited modem dial-up for $20. I borrowed $700 from a credit card and bought two calls to give the stock more time to go up.

    I was up to $1900, decided to wait until I tripled my money but did not anticipate that AOL would get into trouble in the stampede of subscribers that they did not have enough modems to support.

    The stock went down, I waited and finally exited with a $100 profit. I think I paid ~$400 in commissions to Bear Stearns where I worked at the time.

    I'm a good programmer, can probably program anything but I'm encouraged by a post by SteveH ( not to try to build things myself.

    Still, I'm trying to decide whether I should try to learn directional, delta-neutral, volatility, etc. option plays (at ThinkOrSwim?) or go into testing of automated futures systems using whatever software I find most suitable.

    I do have a full-time job at the moment (2 consulting gigs) and while that brings enough money to fund a trading account, it does not leave much time for real-time trading. I could probably squeeze an hour at the opening, though, since I'm 6 hours ahead of CST.

    I would like to leverage my programming skills somehow, as well as my understanding of the software, internet, etc. industries.

    Any advice? Suggestions?

    Thanks in advance, Joel
  4. Chabah



    I have a thread on automated trading stocks here:

    Is there a particular reason you favor options or futures over stocks? I understand the strategies are different, but many of the same concepts apply. For example my intraday breakout system is not unlike a volatility spread.

    It sounds like you haven't done much trading, and you should be aware that most new options traders go broke (at least once). I am not trying to discourage you, but make sure you do some research into trading in general before jumping in.

    I'd recommend reading Market Wizards by Schwager as a start - that describes options, futures, and stock trading including some automated systems. For risk management try the new version of Trade Your Way to Financial Freedom coming out Nov 28th (or find an older version on Amazon or somewhere - it is no longer in book stores).

    There are a lot of trading-specific concepts that you'll want to build in to your system, especially before automation.

    Good luck,

  5. Well, I figure I don't have enough capital (just a few thousand) for stocks whereas it could be enough to dip a toe into ... options most likely. I hope to add more money to the account over time.

    I did buy a whole bunch of books, full list here:

    I didn't know there was a new version of Tharp's book coming out so I bought the old one :-(. Are the differences described somewhere?

    Thanks, Joel
  6. Chabah


    Ah yes, funding is definitely an issue for stocks. On TradeStation the minimum is $30k for a Pattern Day Trading account, which is what I am setting up. For daily trades it is not such an issue since most trades won't qualify as day trades, but for intraday you are limited to 4 trades in 5 days (rolling) if you don't have $30k.

    Let me know how the options trading looks. I am pretty handy with EasyLanguage so if you use TradeStation we might be able to cooperate with strategies and coding.