Good morning/afternoon/evening. I’m a trader that mostly swing trades stock options. I decided to try and take my craft to the next level by reading the Third Edition of Mastering the Trade by John Carter because a couple of friends said that it was really good for swing traders, and all the reviews I could find on the book suggested the same thing. I’m only on Chapter 9 but I feel like I’ve become a much better day trader just from the first 8 chapters. There’s just a tiny little problem: I’m a swing trader, not a day trader (also maybe it’s because I’m only halfway through the book, but I feel like this book should be marketed more towards day traders instead of people who hold positions for multiple days or weeks). I’m big on trying to follow the moves of institutions so the only two concepts that really caught my attentions were the plays that Carter showed using VIX, TICK, PVCA, and TREN. The examples in the book only demonstrated how profit could be made when these internals were used for day traders, but I was wondering if the same internals could be used in a weekly/monthly time period, and for anyone who read the entire book, could the day trading indicators that Carter showed such as tick fades, pivot points, and gap plays also
Just out of curiosity, why do you prefer swing trading options rather than the underlying stocks themselves? What advantage do you gain with a vehicle that you are simultaneously racing time decay on?
Buying calls before a rally for example is cheaper than buying x amount of shares, and the leverage nets me more profit than if I were to buy the stocks directly. The time decay can be an annoyance at times but it’s barely a factor on trades that I take patiently instead of impulsively.
I didn’t really look into his background but apparently he runs some kind of course that a lot of people have taken and become successful in
The problem with that is the market spends 90+% of it's time in a trading range and rallies are hard to predict precisely before the price is reflected in the options themselves. If it were easy to predict a rally everyone would be rich. If you get into options too soon before a rally time decay eats your profits. Too late it's time decay. In it while its rallying and the options cook the rally into the price, plus decay.
You’re right, I have lost a bit of profit from decay where I wouldn’t have had if I bought the stocks directly. I’ve been considering buying the stocks directly and using options contracts as a hedge. I have bought contracts in ranges before and was pretty successful with that.
Honestly a tight stop will render more profits long term, especially if you're swing trading. You may feel its about to rally and it bumps for a day at the top and ranges again. Your option decays with nothing to show for it. A stop gives you the time you need, and if you add up all the times you buy options, decay, sell for a loss it eats profits far more often than a correctly placed stop that actually stops out, assuming you are correct on your premise that the market is about to move up (or down for shorts).