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DayTrading with Options

Id like to start DayTrading(with options).
Does anyone have suggestions how to start using the Technical Scan Workbench to find candidates?


  • markdmarkd mod
    edited December 2020
    Very, VERY risky proposition. If you want day trade options, it would probably be better to trade options on index futures (or the futures themselves). They are much more liquid, have tighter spreads and are less susceptible to news.

    Volume in many stock options is erratic (maybe a few leading tech stocks are exceptions), spreads can be very wide, and surprise news can wipe out your position permanently. Also, except for very close to expiration, option prices do not always move commensurately with stock prices. Options dealers do not want to lose money and they are very smart and very agile. If you want to make money, you have see what's coming before they do and they do nothing else but trade the options they specialize in. What all this means is, as a retail player, you can be right on price direction and still lose money. The leverage and price changes look attractive, but it works against you, too. Your timing in predicting meaningful stock price changes must be excellent - not just for entries - you can't be caught off guard when you are in a position. Unless you have huge capital and really understand the math, its a very hard way to make money and an easy way to lose it.

    But to actually answer your question: to day trade options you probably want to scan intraday; the Stockcharts scanner doesn't do that. In any case, if you are determined to do it, you should probably choose a few very popular, very liquid stocks with more or less rational and regular chart patterns. Get to know them and how they move very well before you put up real money.
  • It is a valuable message I read by chance. Thanks markd I also feel that option is difficult to profit on daily trades. Would it work if trade options in a longer time span, for example, weekly to 3 or 6 months trading periods?
  • markdmarkd mod
    edited June 2023
    Options are meant to be insurance against unexpected market moves. If for some reason you can't let go of your position when the market moves against you, options can make up the losses.

    Options can also used for income. If you own a stock, you can write options against your position, and if the strike never gets exercised, you get to keep the cash.

    "Naked" trading is a different matter (buying or selling the option without an underlying position).

    The option price has two components - the intrinsic value, which is difference between the stock price and the strike price - and time value, which is a function of the length of time until expiration and the volatility of the stock.

    As expiration approaches, the time value diminishes, so if you buy a longer option, you are losing money daily. Nearing expiration, though, more of the option price is in intrinsic value, so it can jump dramatically on a surprise stock price move. Or drop enough to wipe out the intrinsic value.

    When there is a lot of time value, the option price barely moves with the stock price, because most of the option's value is in time premium, not intrinsic value. So, if you buy with a lot time left, you are relying on price to move enough in your direction to compensate for the diminishing time value AND give you a profit.

    For instance, suppose a stock is at 40 and you buy a 40 call at 5. The price has to go to 46 by expiration before you make money.

    But, options dealer know their math - option prices generally are only fair - meaning, most of the time you will break even at best by expiration (that is, the price change will just pay for the time premium) and often prices are very rich. You have to know your math, too, to recognize a bargain. By the way - spread (the difference between buy and ask) and slippage (the time the bid and ask are actually available) can be a problem, too.
  • lmkwinlmkwin ✭✭
    Fun article on the topic. trading options involve buying,one strike in the money.

    "...we are just flipping them like a game of hot potato. Or like a game of musical chairs. You’ll be able to understand the analogy here shortly."
  • markdmarkd mod
    edited June 2023
    I wasn't thinking of the weekly options when I wrote my post, but I think it still stands.

    What does this line from article tell you:

    "You must be willing to put up the money and be OK with losing that amount."

    So keep your positions small and Jack be nimble...cuz its gonna happen....

    Also, I think its bad advice to start out on options with very small capital like 5K. You would have to be very lucky on your first few trades - and that's very unlikely - to stay in the game with so little capital.

    I would add to the article, - keep up with the news on any stock you plan to trade, including of course earning announcement, earnings calls, 8Ks, 10Ks, management changes, regulatory issues, mergers, buyouts, acquisitions, insider position changes, etc. If possible, know what day scheduled events will occur, and when unscheduled events, like takeover announcements, might come out. Contrary news will destroy any technical set up, no matter how "sure thing" it appears to be.

    Also, I don't think there are stops on options, but that might have changed.
  • penny Securities have the opportunity to make big Gains, but, Keep in mind that your Broker may take-away your first born Child if you trade penny securities. Make sure you know what their Commission schedule is, in particular for Low-priced Securities. It may take away any benefit.
  • I do not Disagree, with what was said Above...
  • to answer your question, though, you would Add: AND [optionable is true] to your Scan. Good luck and be careful only put a Tiny bit
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