possible to use "market profile" to trade options?

Hi all

just wondering if i can use the approach of "market profile" to trade options?

any comments appreciated
Ken

 

Hi there,

Market profile is just another way to analyze the data. It isn't a full trading methodology on its own. I'm not sure what you are after here....One can develop a methodology around market profile that aids in direction if that is what you are asking.

Best regards,
MK

 

You might be able to use the "profile" to identify when a market is likely to consolidate or breakout and then position yourself accordingly.

 

Excuse my ignorance, but what exactly is the "market profile" way ?

 

Selling options which have strike prices in the 2nd or 3rd standard deviation (of the bell curve - assuming your volitilty is approx correct) is a strategy i've heard from a few traders. You could then take that a step further and use market profile to build that bell curve.

 

So selling options 2 or 3 sd OTM is called "market profile" trading ? That's a new one on me. Thanks.

 

thanks for all your comments.
Yes it's not a methodology....i'll put my question this way:"will i be able to gain an edge if i analyze the options market from the perspective of market profile instead of traditional TA such as bar chart etc."?

cheers
Ken

 

Some people do. In fact I seem to recall and english trading writer who did --- John Piper.

 

actually i've just finished reading John Piper's <the way to trade>... he did talk about market profile but didn't talk about trading options using market profile...

 

Yes, one can trade options using a Market Profile approach

All financial markets are essentially auction markets and MP concepts work in all of them..

Unfortunately, it will take you longer to learn to trade that way, because after you learn Market Profile, you still have to learn the basics and the not-so-basic concepts for options.

It would be a long road, unless you have some background. One advantage of incorporating Market Profile is that once you understand the concepts you no longer have to search for other approaches, and from then on you have a way to understand all market action. I would suggest beginning with "Mind Over Markets..." by Dalton. For Options, start with McMillan's "Options as Strategic Investment". Figure about a year to internalize all of the content (assuming you study hard, are of average intelligence, and understand what "internalize" means). If it takes long than that or you cannot "get it" that probably means you simply don't have the talent for this work).

Good luck
Steve