Day trading weekly options

Day trading weekly options Helping Traders Thrive. Enroll in an eCourse today! November 2, 2012 by Steve. I love trading liquid weekly options, they are amazing tools if used correctly. Weekly options give a trader leverage, risk management, asymmetric trades, and the ability to make triple digit returns on capital at risk. I know of no other tools that have such upside and limited downside. And many of the weekly options like SPY, IWM, QQQ, AAPL, and GOOGL very liquid so a trader can get in and out them without losing money in the bidask spread like you do with so many farther out dated options. The weekly options that are very close to at-the-money strikes have spreads as small as nickels and dimes during the open and the close of they trading day. The open interest of an option is a big tell for the option contracts potential for liquidity, you will see this on sites like Yahoo! Finance. The less option interest the more danger you will have not having the liquidity there when you go to exit your option trade. I prefer to use weekly options as surrogates for stock during trends of accumulation and distribution, I trade in-the-money weeklies to capture directional trades. Weekly in-the-money-options can be used like synthetic stock option plays when you have over a .85 Delta to create the close to the same potential profit dynamics of owning the stock without the downside risk of owning the actual stock shares for a week or the need for the full capital outlay. Of course long weekly options are a net debit instead of a selling a short option to buy a long one and create the traditional synthetic stock option play that acts just like owning the stock. With a traditional synthetic stock option trade you sell equal puts to have enough of a credit to buy a long calls and the position acts just like you own the stock shares with a positive and negative Delta that is even.

The traditional synthetic stock play with options gives you the same downside as owning the stock does while simply owning the high delta weekly calls caps your loss at the contract price. That is how I use weekly options, to own the movement of a stock in the cheapest way possible. You can get a lot of leverage for your capital with weekly options. There are many times on Thursday and Friday that you can control 100 shares of Apple or Google for $100-$500. With weekly options you get the full upside potential of a trade moving in your favor but the downside is capped by the price of you option contract. It is easier to manage risk, if $400 is 1% of your total trading capital you can buy a $400 weekly option contract so it will be impossible to lose more than 1% of your capital no matter how it moves. If its value drops in half you will lose 0.5% of your total trading capital if it goes to zero you will lose 1% of your total trading capital. If the option contract doubles in value you will have a 1% total return on your capital. If the option contract triples in value you would have a 2% return on your total trading capital. Many times on Thursday and Friday in-the-money options have a +.90 delta and capture 90% or more of a move in the underlying stock, you just have to be right about the direction not the price like you do with out-of-the-money monthly options. Weekly options are versatile, you can roll them over for trend trades or just trade them for day trades. You can stay in a trend with weekly options by selling to close the one you are in and then buying the next weeks option for less capital with a strike back closer to the money. This way you take the money off the table of your winner and buy a new option to continue to follow the trend. Most trades will save transaction costs with weekly options because option commission costs are in most cases cheaper than the commission costs for stocks and for the commission cost of one option contract you will control 100 shares of stock.

Weekly options are the most liquid of all stock options so you eliminate the expense of wide spreads form your costs a and option trader. The bidask spread does not cost a lot of money to get in and out with the top traded weekly options with the most open interest. With trading weekly options on the long side only you do not need a margin account just an option account. Buying option contracts provide all the leverage you will need without having to borrow money from your broker through margin. (However selling options short does require margin). You can get 100% or more return on capital at risk in one day while trading weekly options. That is an amazing asymmetric one day trade, what stock can do this? I can use weekly options the exact same way I trade the stock. I can trade for maximum Delta only with no need for fancy option strategies. You can trade weekly in-the-money-options that is only purely intrinsic value with almost no time or volatility value that you have to over come. Trading weekly options turns down the emotional volume of a trader by only having a small amount of money at risk instead of the larger amount it costs to buy hundreds of shares of stock for a trade. Search. Our eCourses.

Featured Book. New Trader Rich Trader: 2nd Edition. New Traders are greedy and have unrealistic expectations Rich Traders are realistic about their… $3.99 Kindle edition. How To Adapt To Surprises: When Trading. Steve Burns: After a lifelong fascination with financial markets, Steve Burns started investing in 1993, and trading his own accounts in 1995. It was … Read More. Moving Averages 101. If you've been thinking about advertising on Twitter, Steve is your guy! With more than 70,000 dedicated followers, Steve has some of the highest … Read More. ES Weekly Options and E-Mini Options. 10. ES Weekly Options. More commonly known as weekly options on futures, these are used for day trading and short-term swing trading.

Weekly options on futures offer another method of day trading futures with several benefits noted: No futures account needed. Weekly options offer limited risk. Pattern day trading rules don’t apply. Due to the option Greek, if the trader goes long, options increase in value more quickly as they move favorably, but are slower to decrease in value if they are moving against the trader. The negatives are: Short time to expiration. Harder to set limit orders in expectation of entry or target. More effort is required to place orders. As with trading futures, day trading the ES weekly options on a 15-minute chart will allow the trader to access more worthwhile intraday opportunities, compared to the daily chart. 11. E-Mini Options. An e-mini contract is an electronically traded futures contract that is a smaller version of a standard futures contract. As with mini options, an e-mini contract follows the structure of its regularly sized counterpart while being smaller and correspondingly cheaper. While these contracts offer greater leverage for a smaller investment, the flip side of this is that the potential loss is also magnified. E-mini contracts were first made available for the S&P 500 Index and are now available on many other stock market indexes like the Nasdaq 100 and S&P Midcap 400.

These options operate in the same way as options on futures, giving the buyer the right (but not the obligation) to buy or sell the underlying futures contract at a specified price within the duration of the option contract. Online day traders can take advantage of a popular use of e-mini options as a hedging or leveraging tool. These options can be used to increase the gain on futures trading. They can also help to protect a position that is vulnerable to movements in the market. Day trading weekly options Weekly options have become a stalwart among options traders. Unfortunately, but predictable, most traders use them for pure speculation. But thatЂ™s okay. As most of you know, I mostly deal with high-probability options selling strategies. So, the benefit of having a new and growing market of speculators is that we have the ability to take the other side of their trade. I like to use the casino analogy. The speculators (buyers of options) are the gamblers and we (sellers of options) are the casino. And as well all know, over the long-term, the casino always wins. Why?

Ђ¦because probabilities are overwhelmingly on our side. So far, my statistical approach to weekly options has worked well. I introduced a new portfolio (we currently have 4) for Options Advantage subscribers in late February and so far the return on capital has been slightly over 25%. IЂ™m sure some of you may be asking, what are weekly options. Well, in 2005, the Chicago Board Options Exchange introduced ЂњweeklysЂќ to the public. But as you can see from the chart above, it wasnЂ™t until 2009 that the volume of the burgeoning product took off. Now ЂњweeklysЂќ have become one the most popular trading products the market has to offer. So how do I use weekly options? I start out by defining my basket of stocks. Fortunately, the search doesnЂ™t take too long considering weeklys are limited to the more highly-liquid products like SPY, QQQ, DIA and the like. My preference is to use the S&P 500 ETF, SPY. ItЂ™s a highly-liquid product and IЂ™m completely comfortable with the riskreturn SPY offers. More importantly, IЂ™m not exposed to volatility caused by unforeseen news events that can be detrimental to an individual stocksЂ™ price and in turn, my options position. Once IЂ™ve decided on my underlying , in my case SPY, I start to take the same steps I use when selling monthly options.

I monitor on a daily basis the overboughtoversold reading of SPY using a simple indicator known as RSI. And I use it over various timeframes (2), (3) and (5). This gives me a more accurate picture as to just how overbought or oversold SPY is during the short-term. Simply stated, RSI measures how overbought or oversold a stock or ETF is on a daily basis. A reading above 80 means the asset is overbought, below 20 means the asset is oversold. Again, I watch RSI on a daily basis and patiently wait for SPY to move into an extreme overboughtoversold state. Once an extreme reading hits I make a trade. It must be pointed out that just because the options I use are called Weeklys, doesnЂ™t mean I trade them on a weekly basis. Just like my other high-probability strategies I will only make trades that make sense. As always, I allow trades to come to me and not force a trade just for the sake of making a trade. I know this may sound obvious, but other services offer trades because they promise a specific number of trades on a weekly or monthly basis. This doesnЂ™t make sense, nor is it a sustainable and more importantly, profitable approach. Okay, so letЂ™s say SPY pushes into an overbought state like the ETF did on the 2 nd of April. Once, we see a confirmation that an extreme reading has occurred we want to fade the current short-term trend because history tells us when a short-term extreme hits a short-term reprieve is right around the corner.

In our case, we would use a bear call spread. A bear call spread works best when the market moves lower, but also works in a flat to slightly higher market. And this is where the casino analogy really comes into play. Remember, most of the traders using weeklys are speculators aiming for the fences. They want to take a small investment and make exponential returns. Take a look at the options chain below. I want to focus on the percentages in the far left column. Knowing that SPY is currently trading for roughly $182 I can sell options with a probability of success in excess of 85% and bring in a return of 6.9%. If I lower my probability of success I can bring in even more premium, thereby increasing my return. It truly depends on how much risk you are willing to take. I prefer 80% or above. Take the Apr14 187 strike. It has a probability of success (Prob.

OTM) of 85.97%. Those are incredible odds when you consider the speculator (the gambler) has less than a 15% chance of success. ItЂ™s a simple concept that for some reason, not many investors are aware of. One Simple System to Win Nearly 9-out-of 10 Trades. Regular investors dream about these kinds of opportunities Ђ“ but few ever believe theyЂ™re real. Like dragons, the idea of making money on nearly 9-out-10 trades seems the stuff of legendЂ¦ or if real, reserved exclusively for the marketЂ™s slickest traders. Yet, itЂ™s very real. And easily within the reach of regular investors. You can learn all about this safe, simple method Ђ“ and the next three trades shaping up right now Ђ“ by clicking this link here. Slay your own dragon Ђ“ Go here now. . Day Trading ES Weekly Options: An Alternative to Futures. Every so often a new product comes out that opens a new door to opportunity. Since the 80s when computers began their takeover of the trading industry a variety of new products have been created for traders to speculate, hedge, and insure against risk. Electronic index futures such as the E-mini’s (ES, YM, NQ, and TF) allow us to take advantage of price fluctuations tick by tick in the broader indices.

ETFs have changed the way we group baskets of stocks together, allowing us to trade a variety of companies within one instrument. Options enhanced our ability to mitigate risk, by limiting downside and (in certain cases) allowing for unlimited upside potential. One of the drawbacks to long options trading has always been theta, or time decay. An Alternative to Futures. Just like futures, options expire. The difference, as your option contract get closer and closer to expiration the value can begin to decrease dramatically (this can either work in your favor if you’re on the short side, writer of the option or against you if you’re a buyer of an option). That brings us to options on futures , more specifically weekly options on futures. At first glance you might think that weekly options would be extremely risky due to their short expiration, but let’s consider them for another purpose, day trading and short term swing trading using the ES weekly options . If you’re new to options or futures or options on futures here’s a guide from the CME outlining some of the basics of options on futures . Weekly Options on Futures. Weekly options on futures provide a nice alternative to straight up day trading futures, let’s have a look: What are the benefits?

No futures account needed Limited risk (when buying weekly options) Pattern day trade rule does not apply* * The pattern day trade rule states that if your account is less than $25,000 you may only make 3 day trades in a 5 day period. Futures accounts are exempt from this rule, along with weekly options on futures. Another positive to trading weekly options is that (thanks to the option Greek: Delta) going long options increase in value quicker as they move in your favor, and decrease in value slower as they move against you. I use thinkorswim® (now powered by TDAmeritrade) for my charts and stockoptionsoptions on futures trading. Click here to open an account. What are the negatives? Short time to expiration Harder to set limit orders in anticipation of entry or target. Because of the option pricing structure, if you purchased a weekly ES call option on Monday and price moves in your favor, but you hang on until Friday the option has the potential for expiring worthless. In other words, not only do you need to be correct on the direction of the move, the move also needs to occur within a rather quick window of time. For this reason weekly ES options make for a great day trading opportunity. It also requires a little more effort when placing orders since it’s not just a matter of clicking on the price ladder.

Below is an example of the options trade grid in Thinkorswim. Be sure to adjust your quantity accordingly and make sure to play around with them in SIM mode before you attempt trading them live. Uses for ES Weekly Options. Short term price swings (intraday and 1-3 day fluctuations) News plays Insurance or hedge against other positions. Just like futures, day trading the ES weekly options on the 15-min chart allows for some great intraday opportunities. We can also use the ES weekly options to enter on the daily chart. Capital Requirements and Cost Structure. Options on futures act just like any other stock option the slight difference is the cost structure. A traditional stock option controls the equivalent of 100 shares of that stock, thus the cost (less commission) for buying one $7.50 option is $750 or 100x the option bidask price. For ES options on futures however, you’re not controlling 100 shares of stock. The cost (less commission) is only 50x the option bidask price. Thus an $7.50 option only costs $375. Looking at the option trade grid, which option strike will give you the best bang for your buck?

One idea is to pick a strike at the money, meaning a strike right around the current price (one strike in or out of the money works too). Another idea and the method I prefer is to look at the option deltas. If we have a setup on the ES 15-min chart with the distance between the 50% and 61.8% yielding 2 points, we can look to the delta to give us an idea of what our risk will be. For every point the E-mini ES moves, the weekly option contract will move the value of half the delta (approximately). So if we look at an option with a delta of .50 we can estimate that a 2 point move against us will yield approximately a $50 loss. This method of deriving our strike price from the option delta is a much better way to manage our risk. Looking at the distance between the 50 and 61.8 gives us a starting point. Looking out to the -23% target will give us an idea of our riskreward. If you’re new to options or futures or options on futures here’s a guide from the CME outlining some of the basics of options on futures . Why I think they’re neat. The ES weekly options provide a low risk way to day trade the 15-min and daily levels. For traders without a futures account or hesitant about trading futures, these can be a great way to control risk, while still taking advantage of the short term price swings in the ES. About Tim Racette.

19 Responses to “Day Trading ES Weekly Options: An Alternative to Futures” What’s your opinion of trading options versus futures? Thanks Tim, great insight on this product. One question, other than TD Ameritrade, what other brokers offer trading of options on futures? Hi Lucas, besides TD Ameritrade, Stage 5 Trading also offers options on futures. I just wrote a blog post about them you can find on the home page. If you have specific questions for them Max can give you a hand, his email is maxt@s5trading. com, he’s the senior broker at S5 and the one I work with (along with Anthony and FT). OptionsXpress also has Futures Options. Their order entry platform is pretty slick and allows contingency orders. I just opened an account with them and am quite pleased with their customer service…..real fast & friendly. Since I listened to a NinjaTrader presentation on ATR (Av. True Range) on their YouTube channel, it occurred to me that options on the NDX or SPX would be a good way to do it. But I did not realize that optins on the ES or NQ, etc.

were day-tradeable. If that is true, that is rather amazing. However, you need about as much money in your account as trading actual futures. Then a couple of days ago, I saw a CNBC ad from Nadex exchange. WoodiesCCI had promoted them a year or two back about when PFG blew up (they were also recommending that lousy outfit!) so I did not look into it much. But if you know your levels you can do hourly or daily binary options. You’re not going to double your money with any trade, but you might be able to grind out 20-30%. Another good thing about options in general is that the psychology is more manageable (less likely to get freaked out!) You take a position, and are more likely to stick with it. Okay, I forget my main point! Nadex options are only about $50 per contract I believe, so it is certainly more “scalable” than index or futures options which are generally 10-20 X more expensive for a delta of 50%. Excellent article.

answers lots of questions even the exchange doesnt answer. like it lots. Thanks Derek, it’s disappointing how little information there is out there about these great instrument. Hey Tim, great article! Got a question – do ES weekly options have a big amount of time decay between the close at 16:15 Central Time and Globex opening at 17:00 Central Time or is time decay fairly even throughout the entire 23 hours that ES futures options trade for? Just like monthly options, it’s slow at first and speeds up towards expiry. I’ve mostly traded weekly options on an intraday basis, but in the money options will have less time decay priced in than far out of the money ones. For that reason I don’t buy far OTM options (weekly or monthly). Informative article, though when I’ve traded ES futures options(in the money) they have taken forever to fill. If you look at the Dec 12 ES expiry there is typically very low volume traded near the money vs huge volume 20-30pts out of the money. Do you have this issue or do you simply place mkt orders? Also, why trade ITM futures options when QQQs are much more liquid with tighter spreads?

Is the leverage much higher for one vs other? I typically look for the option contracts that do have higher volume, and yes trading the SPY, QQQ, or IWM is a great option as well, options on futures are still pretty new. thank you for your sharing. Just read on CME web site that ES weekly options are European style (excerpt and link below). It means that with ES weeklies sellers don’t have to worry about assignment : ) It’s not the case with SPY, QQQ, IWM. Am I correct? Warm regards, – Artu. PS Excerpt and link: ‘European-style options can be exercised only on the option’s expiration day. This reduces some of the uncertainty for option sellers, as they cannot be assigned prior to expiration (American-style options can be exercised and assigned at any time up to expiration). About how much initial capital is required to start out with es futures options per contract? Thx in advance… That’s a tough one Chuck.

The nice thing with options is that with as little as a few hundred bucks you can put on a position, however if that’s all the money you have then trading becomes WAY more stressful. So for example having $5000-$10,000 of trading capital with $250,000 in longer term investments might be a good balance, it’s different for everyone though. Depends how the $ makes you feel when you’re in a trade. Any link suggestions where I can get more info on the mathematics of an Es options trade? So far everything I’ve found has added to the confusion. Difference Between Options Trading And Futures Trading | optionstrading - February 10, 2016. … Day Trading ES Weekly Options: An Alternative to Futures … – Day trading the ES options on futures provide a low risk way to take advantage of the markets short term price fluctuations. … … Day Trading ES Weekly Options: An Alternative to Futures … – Day trading the ES options on futures provide a low risk way to take advantage of the markets short term price fluctuations. … Trade Management Techniques: How to Set Targets and Stops in Any Market May 10, 2017. TD Ameritrade, Inc. and EminiMind LLC are separate, unaffiliated companies and are not responsible for each other’s services and products.

Featured In: © 2017 EminiMind. All Rights Reserved. Trading carries a high level of risk, and may not be suitable for all investors. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. You are subject to lose all or more of your original investment. Don’t trade with money you can’t afford to lose or money that, if lost, would affect your current lifestyle. This website is neither a solicitation nor an offer to buysell futures. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Day trading weekly options In June of 2017 we ceased operation at Friday Option Trader and have transitioned all our members to our premiere service, SPX Option Trader. Please visit us at spxoptiontrader. com We have averaged over 50% per trade day trading SPX Weekly Options with only one trade per day.

We have a very unique approach in our intraday trading strategies. Each day we do one trade, and we are simply purchasing either a put or a call on the SPX or the SPY weekly options. Our weekly options trading method allows us to make extremely profitable trades with only a single trade per day. We trade highly volatile and highly liquid SPY and SPX weekly options. The market was transformed a few years ago, with the introduction of weekly options. Over the past year the introduction of Monday and Wednesday expiration has made the weekly options market a gold mine for those who have the knowledge on how to trade effectively. Our approach is unique as we only trade once per day. We are trading SPX and SPY weekly option contracts on the day before and day of expiration, so this is a highly risky and speculative approach. Our approach is not for everyone, it is risky as the option contracts we trade expire either the next day or the day we are trading. So there is always a chance that if a trade is a loser, it will be a 100% loser as it will expire worthless at the close. However, such volatility also means huge returns for our winners, as our model portfolio shows. Often the greater the risk, the greater the potential gain, and that is true with our approach.

We recognize that we could potentially lose 100% of our investment in any single trade, as is true with any option purchase. But as our model portfolio shows there is the potential for great rewards with this approach. We trade both In the Money and Out of the Money Put and Call contracts. We day trade SPX and SPY weekly options just before and on the day of expiration. We normally enter the trade within 5 minutes after the opening bell. We discuss what we are planning to do in our one of a kind SPX Daily Outlook that is sent to all our members daily. Our exit times vary based upon market conditions, but we are always out of the trade by the close of the day. Our members receive our newsletter each morning within minutes after the opening bell. We share the exact SPX and SPY option contract we are trading on that day, with % profit targets and % stops and key level forecasts for both the SPX and SPY. Click here for an example what our SPX Daily Outlook looks like. We also provide the SPX Spread Trader which is perfect for those who want precise entry and exit prices. Click here for an example of the SPX Spread Trader.

Our approach requires that a trader is prepared to purchase put and call option contracts and have the ability to respond quickly. We share what we will be doing in the day ahead, and how you respond is up to you. Some seek to mirror our trades, others seek to improve or even develop their own method using ours as a baseline. Some even use our comments and price targets to trade other markets such as binary options. The levels we share each day for the SPX and SPY are an invaluable resource for all day traders. Whatever your approach SPX Option Trader has the potential to change your life with only one trade per day, day trading SPY and SPX weekly options. Sign up today for a free-trial and see how SPX Option Trader can be of benefit to you! WHO WE ARE. Retail traders simply can’t make money on a consistent basis …. Many skeptics…

TradingProof. com was developed to dispel a lot of common myths about option trading. Many say that the average retail trader simply cannot profit in today’s markets. Respectfully, we strongly disagree! Week in and week out, we trade Weekly Options quite successfully at the retail level. We are not floor traders nor investment advisors and we are not licensed brokers so we have no more of a market “edge” than anyone else. Like many other websites, you will find a results page filled with our trades. There will be winners and losers, percentage gains and losses. However, unlike ANY other site out there, we actually provide our trading statements to anyone who wishes to see them. You can see firsthand that our trades were actually executed! Our method is simple. We rely on sound statistical probabilities more so than technical analysis.

While we’re not against technical analysis, we seldom use it since our principles and probabilities tend to work to our advantage. We also do not over leverage our account or try to “kill-it” every trade. While we enjoy an occasional grand-slam, we more often make our money hitting singles and doubles – And we see success most every week! Our blog is completely FREE. Sign up for a free account and browse every trade we make. We currently do not teach our trading methodology, nor do we offer trading advice. We’re simply offering you the opportunity to see how we make our money. Sign Up for FREE Lifetime access to our blog and trading statements! I decided to create this website knowing firsthand the struggles most retail traders go through during the initial learning process. I also know many new traders have exhausted their accounts early on and never get the chance to try again. So, my vision for this website is not to prove the skeptics wrong. It’s to empower you, the retail trader, to educate yourself on trading options with a primary focus on weeklys.

It’s because I lived through the struggles that I now know the endless possibilities because I’ve lived those too! My hopes are that when you read through my site and see my personal trades and trading statements, you will not allow skepticism to enter your mind when it comes to trading. I want you to believe in yourself and your ability to be a successful trader! I did not foresee the creation of this site. However, over the years I’ve stayed busy teaching people the fundamentals of day trading the Emini Markets. Some of these conversations led to the discussion of my option trades which, in turn, led to many requests for such a site. As a result, TradingProof. com was born. At this point, you may be asking yourself “Who is this guy? What makes him an expert?” Well, my name is David Marsh.

Some of you may already know of me through my original site: EminiTradingStrategies. com. I started trading options back in the early 1990’s. In those days, the internet was still pretty new to the trading world. I was introduced to options around 1993 when I attended my first class in Chicago, IL, and a second in Dallas, TX. Knowing absolutely nothing about options, learning options in a classroom environment was incredibly tough. So much so, that I walked out after class frustrated and confused. Today, everything I learned back then for a hefty fee can be learned simply and at no cost thanks to the internet. Over the next several years I traded options with limited success. I had some good trades and I had some bad trades. Overall though, I was losing money. For the most part, I abandoned options trading in the late 90’s and focused more on day trading. I became very successful day trading equities, and eventually the ES, S&P Emini Futures.

Weekly Options eventually became available in 2005. I, like many traders, didn’t even know about weeklys back then. But hey, what did I care? I was primarily trading the ES anyway. Around that time, I started building up my long term retirement fund using mainly stocks and mutual funds. I had a close friend manage most of that for me while I stuck with what I knew: day trading. Then, in 2010, I started trading weekly options on the RUT and SPX. Like most people do when they start trading options, I traded vertical spreads and iron condors. That was working great until I lost my A$$ on a huge iron condor trade. That was a tough lesson learned! It was about 2011 that I then began trading butterfly spreads and diagonal spreads.

That, in turn, is what eventually led me to the weekly options success I enjoy now. I have been using my current method, the same method I use on this blog, for over 18 months with great results. Some of you may think that doesn’t seem like a lot of time. However, keep in mind weeklys are still relatively new, and trades are taken each week as opposed to once a month thus offering more opportunity to initiate trades. My method is to build my retirement money with Weekly options and take those profits and reinvest in long term dividend paying stocks. Important Notice - Risk Disclaimer: Futures and Options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, may cause you to lose more than your original investment. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor. In no event should the content of this website be construed as an express or implied promise, guarantee or implication by or from Traders Education, LLC andor its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided here is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed.

Copyright 2015 Traders Education, LLC | All Rights Reserved | Day trading weekly options Trade Options Weekly no longer appears to be around, but there are people still providing the same basic method (e. g, 5Percent. If you do any amount of browsing on stocks and options you’ve seen ads for services that tout weekly percentage gains of several percent. I’ve never really been tempted to investigate these—I reflexively put them in the generic too-good-to-be-true category, but when Trade Options Weekly offered me a free trial I couldn’t resist. The first time I saw the weekly trades I gasped. While most of my option trades have riskreward ratios between 1:1 and 5:1 the risk reward of these trades is typically 50:1 to 100:1. So, for a best case profit of $1000 I would need to put $50K to $100K at risk. A sharp market move against your position could wipe out all your capital—a 100% loss, in 3 days. The minimum required capital to put at risk is not trivial—in order to make a meaningful profit after commissions and subscription costs are subtracted around $15K needs to be invested. A typical trade using this method would look like this: Trade time: 1-August-2012 12.57pm. SPY Weekly Options expiring 3-August-12. Sell: Put-133 for $.06. Buy: Put-132 for $.04. At a Credit of: $.02. Limit order good for the day. With $15K in capital, you would buy 150 of these spreads. Assuming commission costs of $18 (eoption. com), and factoring in one fourth of your $149.95 Trade Options Weekly monthly subscription cost ($37.5) your best case profit would be $244.5 and your worst case loss would be $14.755K. Many of the Trade Options Weekly historical trades have only a $.01 credit, so the maximum profit on those would be $144.50. Commission costs would be much higher with many brokers (e. g., Fidelity: $127, optionsXpress: $239). The only happy ending for these trades is expiration out of the money.

With these razor thin margins there’s no room for closing out your position early at a profit. Any sort of hedging method would almost certainly eat up all your possible profit. How risky is this trade? I don’t have intra-day data that far back, but SPY’s low on August 1 st ,2012 was 137.40, the day the position was created. So the short put (strike at 133) was at least 3.2% out the money when the trade was initiated. The red bars in the chart below show the days where the S&P500 has closed down more than 3.2% in a two day period. This isn’t particularly comforting… This particular trade did fine, but it had a bit of a scare. On the August 2 nd , with one day until expiration the S&P dropped as low as 135.58, the short put only 1.9% away from being in the money. Drops of 1.9% in one day are more common—387 in the last 63 years. However most of those drops were concentrated in bear markets. Note how the frequency of these drops has increased over the decades.

We’re not imagining that the overall volatility of the market is increasing. Most of the time, these trades will do fine, but if the market really does go south the position will be in trouble well before the short options go in-the-money. In this example, if SPY drops to 133.5 with one day to go your position will be in the red $2400 (assuming 150 spreads and 15 as the implied volatility). In most of these situations the mettle of your advisor will be critical. Will they get you out in time? If the market drop is fast and severe (e. g., overnight crash, terrorist attack, flash crash) there will be nothing to do—your positions will be blown out with no way to recover, your entire investment will be gone. Of course almost everyone would be hurt badly in that situation, but it’s easier to recover when you’re not starting from zero. I think this is not a good method, the riskreward ratio is bad. but it gives me an idea, how if the positions reversed to debit spread? buy 133put and sell 132put. You may loss more often, but one win should cover those losses.

HI Hendra, Your approach certainly would have much less risk. It could be discouraging to take a lot of 1 or 2% losses before having a winner. what about buying OTM options that are cheap that can gain 20-30% in $1 move in the underlying , where the strike is picked at the middle range of the underlying. for example, a delta of 0.1 on abc call that is around 0.1$, can double in price in a $1 move. off set the theta decay with a short position of equivalent value or a few percentage points more. Typically it’s tough to counterbalance the theta costs without losing the upside for you–or picking up a lot of tail risk if things blow up. Commissions would be a factor too, because you’d have to buy a lot of options to make it worth you’re while. Never hurts to paper trade something for a while to get a feel for it. Consider what happens if IVs blow up, that cause do some counter-intuitive things. in the end, no matter what the method, you get the risk free rate. I think I am totally lost here and I don’t know if I am reading this correctly… ” your best case profit would be $244.5 and your worst case loss would be $14.755K.” What you’re saying is that you are risking $15,000 to make a whopping $244.50 with the possibility of losing $14,755?

Who, in their right mind, would make such a trade?! Hi Niel, No, you are reading things correctly. I did gasp when I first understood what they were promoting. The $244.50 is a 1.6% gain in a week, with 15K at risk. Of course the shops promoting these strategies can show how their strategies have done well over recent history, don’t detail the worst case scenarios, and they extol the skills of the managers providing the trades. That’s wild! Thanks for replying back so quickly! Excellent. Thank you for the data, Vance. you must take into account the probability of making the $244.50. Would you risk the $15,000.00 if you had a 99.999% chance of making the $244.50. I would take that trade at those odds.

The trick to a credit spread is in how you adjust the position when the market works against it. In my opinion less than 1 in 100 people have the will power to make the necessary adjustments. They will freeze like a deer in the headlights and hang on to hope that the price action will push the trade back into their favor. The method will survive for the long run in how you adjust the trade when the market starts to really kill you. Very few people will adjust a credit spread to a loss or take the loss and close it out. I am not even sure I have the will power to do this and I have played around with options for years. This is idiotic. You are much better off with a Debit Spread for a 100 bucks, especially if you sell OTM call spread to finance your purchase, and you know the markets do not go up, especially at the top that they are in, parabollically …So your Credit Call Spreads are a safer short trade … Day trading weekly options Our service is unique, we are day traders who focus solely on trading SPX and SPY weekly options. We do a single trade each day, purchasing either a call or a put and seek to profit from the intraday movement in the S&P 500 index (SPX). Target levels for both the SPX and SPY along with the specific weekly option we are trading each day is shared with our subscribers every morning. Our SPX Daily Outlook is posted on our website and sent by email each day. You will know within minutes of the open our forecast for the direction of the SPX and SPY, specific target prices for the low or high and how we plan to trade it. We’ve averaged over 50% per day with our approach. You can seek to duplicate our trades, or use our information in your own trading plan. We also offer the “SPX Spread Trader” a unique set it and forget it method that can be auto traded. Join us today to see for yourself the power of SPX Option Trader.

We’ve averaged over 1,000% per month. SPX Option Trader Features. Here’s what makes our service unique. SPX Spread Trader. This method is especially geared for those that are unable to watch the market every moment. Easy to follow as we provide precise entry prices. This approach trades SPX credit spreads on expiration day. With an over 80% win ratio this is an excellent method for those looking for a “set it and forget” approach. Auto Trading is available for this method. Specific Price Targets. By Traders for Traders.

Over 50% return on average each trading day! We show you how we’ve done it and share each day our plan before we do it. You can examine us for yourself at absolutely no risk. Free 7 day trial of our service! Please note that our SPX Daily Outlook is delayed by 15 minutes for free trials, to protect the integrity of our service. What would you have done with this information? Here are actual forecasts and trades from our SPX Daily Outlook and how we traded SPX weekly Options. 992016 “Close of SPX should be below 2170. 1st target Low below 2163. 2nd Target Low below 2159. 3rd Target Low below 2154.” Actual low and close of day was 2127.81. These forecasts were made before 9:35 on that morning! 312017 “Close of SPX should be above 2380. 1st target high above 2386. 2nd Target high above 2392.

3rd Target high above 2396.” Actual close of the day was 2395.96 and high of the day was 2400.98. These forecasts were made before 9:35 on that morning! 5192017 “Close of SPX should be above 2371. 1st target high above 2377. 2nd Target high above 2383. 3rd Target high above 2387.” Actual high of the day was 2389.06 and close of the day was 2381.73. These forecasts were made before 9:35 on that morning! 952017 “Close of SPX should be below 2471. 1st target Low below 2463. 2nd Target Low below 2458.

3rd Target Low below 2454.” Actual low of the day was 2446.55 and close of day was 2457.85 These forecasts were made before 9:35 on that morning! 992016 “We plan to Buy to Open. SPXW160909p2160 (SPX Weekly Option put Strike 2160) at limit price of 4, looking to enter after 9:35 a. m. EST.” We entered at 3.15 and exited at 26.0 for a 725% profit ! How did you trade on this day? 312017 “We plan to Buy to Open. SPXW170301C2385 (SPX Weekly Option: call, Strike: 2385 Expiration: 030117) at limit price of 3.65, looking to enter after 9:35 a. m. EST.” We entered at 2.50 and exited at 10.50 for a 413% profit ! How did you trade on this day? 5192017 “We plan to Buy to Open. SPXW170519C2375 (SPX Weekly Option: call, Strike: 2375 Expiration: 051917) at limit price of 3.25, looking to enter after 9:35 a. m. EST.” We entered at 2.60 and exited at 12.50 for a 381% profit !

How did you trade on this day? 952017 ” We plan to Buy to Open. SPXW170905P2465 (SPX Weekly Option: put, Strike: 2465 Expiration: 090517) at limit price of 2.45, looking to enter after 9:35 a. m. EST.” We entered at 1.50 and exited at 15.10 for a 907% profit ! How did you trade on this day? Not every trade is this profitable or accurate, but this does give a sense of what we do for our subscribers. We focus solely on day trading SPX and SPY Weekly Options and the information we provide is invaluable to day traders. If having this type of information moments after the opening bell sounds interesting to you, then sign up today for your free trial! SPX Option Trader is NOT a registered broker-dealer or financial advisor. The recommendations and information provided here should NOT be interpreted as investment advice or as an endorsement of any security or company's stock. This information is provided for informational purposes only and without warranty of any kind. Our strategies are not intended to meet the suitability requirements for every investor. Be advised that Stock trading especially option trading has large potential rewards, as well as large potential risks involved. Trading of Options may not be suitable for all users of this information.

You, and not SPX Option Trader assume the entire cost and risk of any investing or trading you choose to undertake. Remember, past performance does not ensure future results. There are no guarantees that any one individual's portfolio will match exactly with what our model portfolio's performance is. Always do your own research and consider consulting a qualified investment professional before investing your money. Editors, staff and members of SPX Option Trader may have positions in securities listed herein. SPX Option Trader is completely independent and receives no compensation from any company mentioned. The receipt of this information constitutes your acceptance of these terms and conditions. SPX Option Trader is the copyright owner of all information contained in this website, unless otherwise noted. The redistribution of information and content provided here, without the express written consent of SPX Option Trader is strictly prohibited. If you have any questions please contact us. Introduction - Day Trading and Options. Options are not a traditional component of day-trading method.

But this is changing. These days, many day-trading companies are offering their members the ability to trade options. And traders are also discovering that they can successfully apply classic day-trading techniques to buying and selling options. It is also important to note that day trading options is one of the lowest-cost strategies available to investors, as options give the trader the ability to get into and out of positions far more quickly and often with less risk than securities like stocks, bonds, and mutual funds. One of the major benefits associated with options is that they cost far less than buying the underlying asset (such as shares of stock) outright. So rather than buy or sell shares of stock, the trader can simply buy an option and control the same number of shares for far less money. An option is a financial derivative. It is a legal contract that gives the purchaser the right to buy or sell a security at a specific price during a certain period of time or on a specific date (the exercise date). The seller also holds an obligation to fulfill the transaction, which is to sell or buy, if the buyer chooses to “exercise” the option before its expiration. The U. S. Securities and Exchange Commission regulates the buying and selling of stock options.

What Is in an Options Contract? An option contract should specify the following: type of option (call option or put option) underlying security unit of trade (number of shares) strike price (price at which option can be exercised) expiration date. Many day traders who trade futures also trade options because options have a lot in common with futures. For one, they are frequently based upon the same underlying financial instruments. They are also quite similar in their contract structures. However, the manner in which options are traded is very different from how futures are traded. There is a lot more range in the availability of options, and the rules of trading are also different. Options can be purchased not only on futures markets, but also on stock indexes, as well as on individual stocks. Options can be traded singularly, or they can be bought in conjunction with futures contracts or stock trades, to form a type of insurance on the trade. Options offer leverage and the ability to hedge and limit losses.

However, without proper understanding and correct trading strategies, options can be classed as risky investments, and this reputation often intimidates new traders. Challenges of Day Trading with Options. Day traders will encounter a couple of problems when using options, none of which are insurmountable. Price movement can become dampened due to the time value element of the option premium, such as with near-the-money options. Although the inherent value may go up along with the underlying stock price, this gain is undermined somewhat by the loss of time value. Keep in mind, however, that the time value for day trading is quite limited. The bid-ask spreads are usually wider for options than they are for stocks. This is mainly due to the reduced liquidity of the options market. This can vary as much as half a point, which will cut into the limited profit of the typical day trade. Day trading weekly options Trade Options Weekly no longer appears to be around, but there are people still providing the same basic method (e. g, 5Percent. If you do any amount of browsing on stocks and options you’ve seen ads for services that tout weekly percentage gains of several percent.

I’ve never really been tempted to investigate these—I reflexively put them in the generic too-good-to-be-true category, but when Trade Options Weekly offered me a free trial I couldn’t resist. The first time I saw the weekly trades I gasped. While most of my option trades have riskreward ratios between 1:1 and 5:1 the risk reward of these trades is typically 50:1 to 100:1. So, for a best case profit of $1000 I would need to put $50K to $100K at risk. A sharp market move against your position could wipe out all your capital—a 100% loss, in 3 days. The minimum required capital to put at risk is not trivial—in order to make a meaningful profit after commissions and subscription costs are subtracted around $15K needs to be invested. A typical trade using this method would look like this: Trade time: 1-August-2012 12.57pm. SPY Weekly Options expiring 3-August-12. Sell: Put-133 for $.06. Buy: Put-132 for $.04. At a Credit of: $.02. Limit order good for the day. With $15K in capital, you would buy 150 of these spreads. Assuming commission costs of $18 (eoption. com), and factoring in one fourth of your $149.95 Trade Options Weekly monthly subscription cost ($37.5) your best case profit would be $244.5 and your worst case loss would be $14.755K.

Many of the Trade Options Weekly historical trades have only a $.01 credit, so the maximum profit on those would be $144.50. Commission costs would be much higher with many brokers (e. g., Fidelity: $127, optionsXpress: $239). The only happy ending for these trades is expiration out of the money. With these razor thin margins there’s no room for closing out your position early at a profit. Any sort of hedging method would almost certainly eat up all your possible profit. How risky is this trade? I don’t have intra-day data that far back, but SPY’s low on August 1 st ,2012 was 137.40, the day the position was created. So the short put (strike at 133) was at least 3.2% out the money when the trade was initiated. The red bars in the chart below show the days where the S&P500 has closed down more than 3.2% in a two day period. This isn’t particularly comforting… This particular trade did fine, but it had a bit of a scare. On the August 2 nd , with one day until expiration the S&P dropped as low as 135.58, the short put only 1.9% away from being in the money. Drops of 1.9% in one day are more common—387 in the last 63 years.

However most of those drops were concentrated in bear markets. Note how the frequency of these drops has increased over the decades. We’re not imagining that the overall volatility of the market is increasing. Most of the time, these trades will do fine, but if the market really does go south the position will be in trouble well before the short options go in-the-money. In this example, if SPY drops to 133.5 with one day to go your position will be in the red $2400 (assuming 150 spreads and 15 as the implied volatility). In most of these situations the mettle of your advisor will be critical. Will they get you out in time? If the market drop is fast and severe (e. g., overnight crash, terrorist attack, flash crash) there will be nothing to do—your positions will be blown out with no way to recover, your entire investment will be gone. Of course almost everyone would be hurt badly in that situation, but it’s easier to recover when you’re not starting from zero. I think this is not a good method, the riskreward ratio is bad.

but it gives me an idea, how if the positions reversed to debit spread? buy 133put and sell 132put. You may loss more often, but one win should cover those losses. HI Hendra, Your approach certainly would have much less risk. It could be discouraging to take a lot of 1 or 2% losses before having a winner. what about buying OTM options that are cheap that can gain 20-30% in $1 move in the underlying , where the strike is picked at the middle range of the underlying. for example, a delta of 0.1 on abc call that is around 0.1$, can double in price in a $1 move. off set the theta decay with a short position of equivalent value or a few percentage points more. Typically it’s tough to counterbalance the theta costs without losing the upside for you–or picking up a lot of tail risk if things blow up. Commissions would be a factor too, because you’d have to buy a lot of options to make it worth you’re while. Never hurts to paper trade something for a while to get a feel for it. Consider what happens if IVs blow up, that cause do some counter-intuitive things. in the end, no matter what the method, you get the risk free rate. I think I am totally lost here and I don’t know if I am reading this correctly… ” your best case profit would be $244.5 and your worst case loss would be $14.755K.

” What you’re saying is that you are risking $15,000 to make a whopping $244.50 with the possibility of losing $14,755? Who, in their right mind, would make such a trade?! Hi Niel, No, you are reading things correctly. I did gasp when I first understood what they were promoting. The $244.50 is a 1.6% gain in a week, with 15K at risk. Of course the shops promoting these strategies can show how their strategies have done well over recent history, don’t detail the worst case scenarios, and they extol the skills of the managers providing the trades. That’s wild! Thanks for replying back so quickly! Excellent. Thank you for the data, Vance. you must take into account the probability of making the $244.50. Would you risk the $15,000.00 if you had a 99.999% chance of making the $244.50. I would take that trade at those odds.

The trick to a credit spread is in how you adjust the position when the market works against it. In my opinion less than 1 in 100 people have the will power to make the necessary adjustments. They will freeze like a deer in the headlights and hang on to hope that the price action will push the trade back into their favor. The method will survive for the long run in how you adjust the trade when the market starts to really kill you. Very few people will adjust a credit spread to a loss or take the loss and close it out. I am not even sure I have the will power to do this and I have played around with options for years. This is idiotic. You are much better off with a Debit Spread for a 100 bucks, especially if you sell OTM call spread to finance your purchase, and you know the markets do not go up, especially at the top that they are in, parabollically …So your Credit Call Spreads are a safer short trade …