having a time stop when swing trading (1-10 trading days w/ 5 being the average) is a must along w/ the usual price stop (i'm only talking about going long premium).
You have to trade 2x atm options to get the same stock exposure. While theta and gamma may not be relevant in most cases, vega can. Vega is the "plug factor." So if you are long a call and the stock rallies 2% and everyone knows it's bullshit then vol will magically come in making the profit lower than buying stock.
McMillan writes about buying deep ITM options as a proxy for stock, but not in the context of day trading. Any thoughts on this?
The spreads are just too wide DITM. Three end results can happen each day; up, down or flat. If you bet down, you will lose for that day if the underlying is flat or up. You would also lose if it is only slightly down from paying the spread to get in and out. Nothing sucks more than being right about the direction of the underlying on any given day and still losing money.
Assuming you are talking about options with little time premium: Spreads tend to be wide. Practically speaking margin isn't that much more favorable vs stock. You might have dividend risks (operationally early exercising) as well as potentially different tax implications on those dividends. The "pro's" don't buy deep in calls as a proxy for stock unless they are playing regulatory games (Icahn) or accessbility games (trading OTC options because they aren't allow to own the actual stock).
Very much agree..I have had a few option trades where the underlying was slightly up EOD and the option value had decreased..WTH ? In very liquid, high volume stocks with 20-30 days until expiry..
I don't really have one, I haven't traded this way since last year except for a trade or two. I haven't been trading anything right now, I have taken some time off to get more practice in and work on some strategies so I could have a better game plan and approach to everything.
I have taken two trades in the past two days, one each morning once I see a setup occur. Yesterday I sold WAAAYYY too early, I took a $350 gain instead of a $6000 one by about 30 minutes, but still a profit. Today I took a $914 profit after commission. I made it a point to hold longer as long as my setup was valid still. My issue has been getting nervous once the trade runs a few hundred in my direction and closing it out quickly out of fear it is going to reverse. Today I held significantly longer and it paid off considerably. What made me blow up last year, was I would cut the winners short and let the losers run. It worked great for 4 out of 5 days, but the one day a week I was wrong would wipe out all the gains plus considerably more. Averaging down and "knowing it would come back" was my downfall.
The responses on here indicate that intraday option trading is not very viable, efficient and has too many variables associated with it too be consistently profitable.. Also that the underlying should be traded instead..I whole heartedly agree.. but for the small retail trader with a 10K acct and not associated with a prop firms resources, then what is the alternative ?