Guys, From what I have seen, it looks like the QQQ options have the narrowest spreads % wise. Somebody has seen better options to daytrade then these ? They also offer good liquidity. Anyone has some suggestions for better options daytrading vehicles ? Regards, Sabena.
Well, I think together with the SPX cash index and OEX index options they offer the best spreads for daytrading. Virgin.
On something like INTC or QQQ, what advantage is there to options vs trading the stock? Other than leverage, I don't see much.
There are a couple of compelling reasons to trade the options vs. the stock itself. If you are a daytrader then the only real reason is leverage specially with the new pattern daytrading rules. However, if you are a swingtrader who needs to hold on to positions greater than a day, options could be a good option(no pun intended) due to its limited liability feature. Picture buying Tyco when it went down to 25. Do you buy at $25 hoping that it won't be another KMart or Enron. However, I can buy the 25 call sell the 35 call and spend $200 knowing that even if TYC goes to Zero I can only lose $200. Or if I am a pair trader following stock a and b, once it goes to extremes I can initiate offsetting option positions knowing that if the pair collapses, I am only out a fixed amount. Most compelling reason in trading it over the underlying is that option premiums fluctuate depending on market condition,news events, rumors,etc. As an option trader you can take advantage of this without having to worry about market direction. Look at DOW or Kodak.- the premiums between the front month and the back month are huge. You can sell the Mar option buy the April option with a 10% edge. In this trade several scenarios can happen 1. Premium differentials revert to their mean- you make good $ 2. Premiums levels rise while reverting to their mean- you make much mo $ 3. Underlying goes to hell or heaven - you lose little since you bought the calendar spread really cheap. 4. Undelying stays around where you put position on- you make money due to time decay. 5. Premium levels fall without reverting to their mean. You might wash on the trade since your long back month will decay BUT your front month will decay faster and fall harder (remember your 10% edge). This ability to arb different vol levels is the most important compelling reason to trade options. Hope this helps.
stock777: perhaps you could read something about options strategies like butterflies, condors etc (try google). you can do many things with options that are impossible with a stock. you can go short after a downtick. and you can profit from non-moving markets (if there is any
Thanks for the informative replies. Yes, I'm aware of the complex positions that are possible with options. I was really referring to intraday trading, and should have said so.
There is one other thing about intraday trading w options. Picture TYCO range of 32 to 24 huge prints go around 24 then stops going down. Maybe take a shot buying 2 calls knopwing that no matter what your lost is maxed and fixed. $200 w/ a chance to quadruple in the day due to vacuum and short squeezes intraday Other than this 'story stock' phenomemnon on 5-10 times volume where violent short squeezes can occur, no reason to use options Good luck