What makes options so tough to trade compared to other instruments such as swaps, futures, FX, etc.? I believe all instruments, including regular stocks, need lots of hardwork and dedication in order to be consistently profitable by trading them. I understand that there are many variables to consider with options. But at the same time there exist lots of strategies between calls and puts to hedge your positions and still be profitable provided you have gone with the right direction. I know its not easy. Its just that I prefer to trade an expensive underlying stock via options so that I can benefit from the leverage and the fact that small fluctuations in the stock price mean higher movements in the derivative. Otherwise it is impossible to trade profitably with stocks with such low starting capital IMO.
Convexity. (Although obviously swaps have convexity issues as well, depending on what you're swapping) If you're trying to only trade "something cheap", you're setting yourself up for pain. Buying $1 options because that's all you can afford implies all sorts of things about the probabilities and underlying movements you must have to make money. Think of it this way, if it requires a 5% rally to make a $1 option a $1.20 option, you're requiring extraordinary movement to make a relatively small amount of money.
Let the OP blow his account out daytrading such instruments, then he'll realize the folly in trying to trade in such a way.
As an aside, since you're in the EU, you might want to look at KOSPI options. Very tight spreads that makes daytrading possible. (Otherwise, a $1 option with a .10 spread still requires a 10% move just to break even)
With futures, stocks and FX it is straightforward - you either buy or sell - if the instrument moves your way you make money, if it moves against you you lose money and if it doesn't move you breakeven. With options you can be dead right on the direction and still lose money.
because of the previous post I would advise you not to daytrade options but trade remote with a prop-firm. This way you can also trade with a relative small amount of capital. Sorry to say so, but you seem very naive concerning trading. Options are amongst the harder instruments to trade. Like some people mentioned before, there is the spread to overcome to make money. Since you are not a market maker this will be hard to do to make consistent money intraday. You will need big moves and few losers. If you know how to do this, you're better of trading futures, more bang for the buck.
I understand what you guys are getting at. I was studying the behaviour on the IBEX35-based options (spanish stock market) today, and have to say that I am let down on the way the DON'T mimmick the index's performance very accurately. I guess the large spreads (ie. even 4 to 5 % spread is very high for intraday moves), low volume, and erratic moves in prices compared to what the actual index is doing- are all at fault. I am also at risk of a loss in vega and the other variables when trading options. Since my edge or trading system revolves around market trend and basically direction, I guess I should look into the futures a poster above had mentioned. Or I could also look at an ETF based on the spanish index. Even then, I think futures will provide more trading entries / exits for long and short positions as well as much needed leverage to be profitable on an intraday basis.
the only way to trade intraday options is sitting on bids and asks and picking out options while getting your right delta using another instrument. In this way your getting your edge. It's basically market making. If you do a decent volume you can make a nice living. I did this for some time on DIA, but then cancellation costs wrecked this.
Dude, Trade 1 corn futures or one E-mini contract...and that's it. when you have tripled your money, then trade 2....so on...don't do anything else...