Trading the NDX Options

Discussion in 'Strategy Development' started by options4me, Sep 5, 2008.

  1. Hello,
    New to the forum, but not trading.
    I have been sucessfully trading the options on the NASDAQ 100 (NDX) for a couple weeks now, and what I have began to notice is a pattern that is very tradeable.

    When there is a gap opening the gap is "Usually" filled in during the same day (or really close, like today).

    The chart pattern in the 45 minutes will help detirmine the support and resistance for the days trade.

    The fib retracement on this first 45 minutes will give you set targets for your trade.
    I use the fib retracement a little different. Instead of placing it on the High and the Low, I will wait for the first support / resistance to show itself, and then set it like this...
    Place the "0" on the LOW and place the 38% line on the HIGH.
    This will give you a projection target to trade at.
    I then will trade off the rebound of the 61.8% line (Call or Put is detirmined by the opening trend).
    Redraw the Fib retracement now from the Trade entry point, back to the next major previous support, again using the 38% line for the reference. This will give you and expanded target range. I will exit the trade near the next Fib line.

    I have attached a snapshot of my trade today so you can get the picture.



    BTW...I made $1360 after commissions on this.
  2. great many NDX option contracts do you trade at a time?how many trades per day?how long do you usually hold the trades?I am looking at trading them also...
  3. Thanks.
    I can always count on this website for a good laugh.
    Yes, it is quite amazing that gaps have been filled over the last “couple weeks” since we have been trading back in forth in a narrow range. I think you should make a formal announcement that all back testing can be stopped and a cursory glance at the few weeks is sufficient on which to base your trading. Also, claiming a profitable trade after the fact makes you look like a fool.

    By the way, have you graduated high school yet? You might want to work on your spelling before going out into the real world: sucessfully, detirmine, detirmined.
  4. Use NQ futures instead
  5. tman


    I've been looking at trading nq options instead, but aren't commissions significantly higher than on the ndx??
  6. Coach was talking about using the NQ futures to play intraday straight deltas instead of NDX options, which I would agree with.
    I have traded NDX options, and they are not too bad. But when I tried NQ options it was basically a waste of time, the spreads are ridiculous and the market makers are terrible. ES options are ok though. Most firms charge about double to trade a futures option compared to an equity/index option.
  7. tman


    Sorry, missed that. I totally agree about trading futures for a short term directional play.
  8. NDX options are very good for trading. Generally there is good volume, and 0.10 off the mid is achievable within minutes almost all the time. Far OTM options are a little trickier, but generally anything with 200 points of the ATM is just fine. If you have found a pattern, you can of course play it with OTM options, giving yourself a safety margin if you happen to be a little off the mark.
    NDX options respond pretty predicably most of the time. Occasionally, you need to watch and see if the volatility is going a little high or too low. If the IV is over 30, you are on the high side of average. If it is under 22%, it's fairly low. Of course, future volatility is a bit hard to predict, but it does tend to revert to the mean over time. It just might take six months!
  9. Gap Trading has been around for a while.

    brandonf has posted some of his test results in ET.
    I suggest you do a search on it.
  10. This thread should have been deleted... it was a duplicate that I thought did not get posted.
    I started another thread in the Journals.
    #10     Sep 15, 2008