In my testing I've found out that trades w bad alphas get stale really fast while stocks that have good IV's which result in higher aplhas has a little bit more shelf life. Case in point Nov 11 2011 weekly - AAPL and MA had really bad alphas, both of them sat for about 2 hours, huge pnl down on straddle. Contrast w another stock with an alpha of 1 has a little bit more staying power before it starts to head south/Buy trader an extra 1 hour to wait for move.
Hi, Thanks, agree with straddle, that doesnt make any sense. so yes it would be imminent so when you refer to weekly, what does this mean ? never heard this term in option ? I prefer a little risk, so I think I would buy ATM sell OTM verticle for example.... if bullish, but not sure how weekly terminology plays into this ? I would just look at opion chain related to the commodity 9 I would be looking at gold or oil in many cases, not equities) thanks agin
When you look at an option chain, you will have a choice of April Weekly, May first month, June second month, July third month, all the way out to yearly options called LEAPS. Depends on how much time you need to trade your strategy.
Ok thanks. For example instead of going long the future I will be buying an ATM call and selling a maybe 25 delta OTM strike? So the short will or should be worth bit... I would not buy OTM because this is a bias directional play on the underling for anywhere from 1 to 5 days...
I am looking only at gold oil nat gas. Commodities really. Not seeing this weekly option basically I take the month I am wanting to bet on with respect to futures except that I use options so if I am looking at June futures I use a ATM June gold call long and sell a OTM strike with a 25 delta or so.
Than you. If I buy ATM what strike to choose Otm and why? and I am guessing this is better than a bet on the futures if and when I have a strong directional bias on the underlying itself for a few days or week.... Not a opinion about volatility IV or otherwise
Have you also failed at trading common stocks? Why not try to develop at least a slight directional edge trading the underlying before heading straight into the option pit?
.....a nice overview of verticals, i think the biggest problem with the way many folks use verticals is the blind side to the amount of leverage and risk they are using, you need to position size correctly and have a plan for recovery if things turn against you... ....you can set up a table of various strike combos to get a picture of risk/reward across the available strikes and possible underly moves.... ....as you say, your expectation of will-go/wont-go can be used to help determine the choice of debit or credit...
Traderlux I find the discussion on verticals interesting. But whatever it is you are saying is apparently way over my head. I´d like to know how you can adjust verticals and morph into other things for instance?
I´m trying to put on my first BUTTERFLY trade in TOS, but I don´t seem to get any order form, when I click on anything, with the butterfly index? Is there a trick to this?