Why do you trade options?

Discussion in 'Options' started by aeliodon, Jan 20, 2007.


  1. I wasn't aware of this. Do you mean options on index futures like ES/YM/etc.?
     
    #11     Jan 21, 2007

  2. I have been trading stocks and options almost a decade.
    The latter half of my experience has concentrated on OEX options,
    with occassional stock option trades, but the OEX is my staple. All my trading is straight call or put buying.
    Why do I trade options?
    Because I can concentrate on one thing: the OEX.
    I find it difficult to scan and monitor a large group of stocks.
    Time wise, it seems like scanning the stock universe is all consuming. Quality family time suffers. I end up with no life.
    By concentrating on a single index, you either get to know it well enough to successfully trade it or you move on to something else. The "get good or get out" concept.
    When the OEX activity is slow, I will also occassionally buy options on certain stocks that I feel have great charts, but I don't spend a lot of time on individual stocks.
    I never risk more than 4.0% of my option account on anyone trade and I never have more than 2 open positions in the same market direction.
    I hope that was helpful.


    Jeff
     
    #12     Jan 21, 2007
  3. aeliodon:

    Broad Based Index Options per CBOE

    DJX - Dow Jones Industrial Average
    DXL - Jumbo-DJX Index Options
    OEX® - S&P 100® Index Options
    OEX® - S&P 100® Index LEAPS
    XEO® - European-style S&P 100® Index Options
    VIX - CBOE Volatility Index® Options
    SPX - S&P 500® Index Options
    XSP - Mini-SPX Index Options
    SPL - S&P Long-Dated Options
    SML - S&P® SmallCap 600 Index
    NDX - Nasdaq-100® Index Options
    MNX® - CBOE Mini-NDX Index Options
    MML - CBOE Mini-NDX Long-Dated
    GTC - GSTI™ Composite Index Options
    RUI - Russell 1000® Index
    RLG - Russell 1000® Growth Index
    RLV - Russell 1000® Value Index
    RUT - Russell 2000® Index
    RMN - Mini-Russell 2000® Index
     
    #13     Jan 21, 2007
  4. roncer

    roncer

    I also like Dave stay focused on the OEX. I like the slower price changes with OEX options compared to the ES futures. However I really wonder about some of the inconsistancy in time regarding fills. Closing an order is generally quick but often I find I have to wait up to around a minute to know whether or not I have been filled on a placed order. This is a hassel. Makes me really wonder what's happening with the market makers. Sometimes one option appears easier to trade than another. I am not sure why. It may be a different market maker?

    Yet I do like the OEX and would very much appreciate hearing others comments on this market as well as any of the other options markets.

    Ron
     
    #14     Jan 21, 2007
  5. #15     Jan 21, 2007

  6. Ron,
    I have also had the delayed fill problem on occasion, but with I.B., it is usually only an occasional problem and not the norm.
    Oddly enough, many times delayed fills end up being a positive surprise when they fill a sell order higher than my limit sell price.


    Jeff
     
    #16     Jan 21, 2007
  7. I think I miss something here, maybe you can explain. Why would you need to trade 50 different option positions? For very 100 stock you could buy 2 options. Thats only 1 position still.
    You max risk would be the premium of the options ( times 2). Regulate that against your 2% rule and you have the number of options you could buy. No need to put in stoplosses anymore :).

    I do not recommend buying long options perse, but it is a good alternative compared to buying the stock proper. If anything it would be for capital requirement.

    Ursa..
     
    #17     Jan 21, 2007
  8. Jeff, you actually explained why you preferred trading the index, rather than why you prefer options. You could also trade futures for the index.
    I too only trade indexes currently, using options for multiweek short spreads that and futures for intraday scalping, when I find the time.

    Ursa..
     
    #18     Jan 21, 2007
  9. MTE

    MTE

    OEX options are pit-traded hence the slower confirms, order placings, cancellations and etc.

    One note of caution when trading OEX options is the American styling making them prone to early exercise. To avoid that (if desired) one can trade XEO, which is the same index, but has European-style options.
     
    #19     Jan 22, 2007
  10. Ursa,

    I have never really considered trading futures.
    My trading system has 1 to 3 day hold times per signal, which is ideal for front month options.
    I can't imagine anyone holding futures contracts for 2 or 3 days.


    Jeff
     
    #20     Jan 22, 2007