Hi Sean,
Glad you like the thread. I'm delighted it has become a home for so many, novices and experts alike, who are interested in trading options.
As I said in the header, this is very much an experiment for me. My initial aim was to use options as a daytrading vehicle in support of my stock trades as listed on the main thread. To date, stocks remain my primary trading market. I'm just more comfortable there, and feel more "in control". Like you, I get frustrated with the inconsistency in option premium movement vis-a-vis the stock price. But generally, they do tend to move in the same direction.
To answer your questions:
1. for the most part I've been trading 1 month out. Someone else here said to avoid the last 2 weeks of the expiry month, and I'd have to second that. But I'm reluctant to pay premium for more than a month, since I'm considering these short-term trades.
2. you can always set stops and limit sells on your positions if you can't watch the market. I always set limit sells, and many have been triggered while I'm away from the computer. I usually miss about 3 hours of each trading day. Stops, though, will need a wide berth...up to 50% loss.
3. I'd limit options on stocks to those stocks that trade over 1mill ADV. I only trade stocks in that category. This will usually ensure a relatively strong market in the ATM/ITM contracts. I only use limits between the spread, unless the spread is a nickel...as it usually is on the Q's. Sometimes I'll place it at the bid if the intraday market is oversold/overbought counter to my position.
Hope that helps, TC |
