Options Daytrading?

Discussion in 'Professional Trading' started by WarrenPeace, Nov 15, 2007.

  1. So I just recently got into Options Trading...

    I did my homework, read up on all the fundamentals on how they work and what not, then I found Virtual Trading.

    At Optionsxpress.com I opened up my account with them just to use their Virtual Trading Application (Quotes Delayed 15mins.)

    Now for the past week I have traded with the Simulator from Market Opening to Market Closing, watching gains/losses fluctuate endlessly!

    Every morning I reset my account value (fake, virtual funds) to 5K, and try to achieve a higher gain by the end of the day.

    For the first week I took heavy losses and slowly started to learn the quick calculations on where I want to be (i.e. For a gain of 500$ i need to cash out at XX option price...)

    So now on my second week, I have closed out my account at market closing with large gains. And I wonder to myself, is this really possible?

    For example, today at 9:32 AM I start to make my trades, RIMM Puts, AAPL Calls... etc etc.

    By around 11AM i've lost 1300$ and i'm down to 3700$. I sell everything off at Market Value, then buy a RIMM NOV 105 Put, an hour and a half later my account goes from 3700$ to 9000$ finally reaching its peak at 13000$ somewhere around 3:45PM.

    I understand how volatile and risky Options can be, but is it seriously possible to take a 5k investment, risk it all on a Put or Call, and sell out making about 138% return in one day of trading?

    If so, i'm seriously considering Options Daytrading with something small at first, such as 4-6k a week, stick to a schedule of making at least 2k a week, then laying low until next week without getting too greedy.
     
  2. Optiosn are not meant for daytrading.

    Low deltas compared to movement of the stock

    Wide bid/ask spreads relative to the underlying movements.

    IV crushes in minor instances

    can it be done, perhaps, but you will be spinning you wheels mostly chasing pennies.
     
  3. Of course it is possible, just not consistently repeatable.

    You are virtually guaranteed to lose all your money eventually because you have no idea what you are doing. Paper trade for several months, taking the trading seriously as if it were real money, and you will start to see why your last sentence is ludicrous. When you have lost all your paper money, then start to paper trade the underlying with good r/r and money management. Eventually you will be ready to trade real money and have, at best, a 10% probability of consistent success.
     
  4. pv150

    pv150

    Yes to the first question, no to the second assertion. It's tough enough to get realistic fills paper daytrading stocks, and the options market is a whole different animal. Understand that the more times you risk an entire account going long an exponentially depreciating asset a day before it expires, the more likely you will blow it out.

    For your second idea, the pattern daytrading rule applies to options too, so >25k is required. We probably get two dozen trading days a year with today's kind of volatility. Add to that the need for you to be near expiration, and you're down to a handful of days to do what you did. So be ready for a lot of frustration the rest of the year.
     
  5. Daytrading options can be very risky when trading actively. ex. hitting the bid or offer as opposed to bidding and offering. The spread is what will kill you. It is profitable if you understand volatility and risks in dealing with the companies you look to trade. I would say to trade something relatively liquid. ie csco, qqqq, msft. something like this. You can get smoked with rimm, goog, aapl and high dollar stocks like this. You can also get smoked with thin stocks like stv, ej, yge. It sounds to me as if you dont understand the game yet. stick with liquid low dollar names and do yourself and everyone you know a big favor. we all want to see you learn and be profitable. p
     
  6. It is hard to daytrade options.

    You need a significant movement of the underlying stock (or ETF) to overcome the spread.
     
  7. Not true. its called trading passively. Advertise the bid and offer and you collect the spread. Meaning someone else hits you.
     
  8. Thanks for the responses,

    I understand how volatile short terming options like this is, i've seen it on the virtual trader... Order fills, then immediately take a loss of about 1K Hah!

    I completely forgot about the 25K needed for pattern trading, thanks for the reminder.

    I am still considering doing a couple of trades next week and keep them open for a few days, nothing too big.

    Thanks again for all the feedback!
     
  9. Try swing trading using options looking for positions to hold for a week or a month or two. Might be easier to find positions and manage the risk on your portfolio and no daytrading rules if you stick with it.
     
  10. C'mon OC. Daytrading options can be very profitable, but probably not how the OP is trying to do it.

    To the OP I would say not to daytrade options until you've got a bunch more experience. I traded options for about a decade before I started daytrading them. Now I make much more daytrading them than I ever did swing trading them. The strategy is much different and you really have to know what you're doing. There are only a handful of options worth daytrading. Conversely, I would suggest that you practice on e-minis for the next 2 years or so. ES or NQ are my favorite next to NDX and SPX options.

    I strongly suggest daytrading NQ first, and then after a couple years if you're doing well, make the transition into NDX options. If you can't make money off NQ, then you'll fail miserably at NDX options.
     
    #10     Nov 16, 2007