Options - Intraday Trading

[randomtrader]

There seems to be very little discussion on derivatives on this site. Is there another Forum site I'm not aware of that has a higher volume of derivatives discussion?

 

[wayneL]

Re: Alternative forums?

There seems to be very little discussion on derivatives on this site. Is there another Forum site I'm not aware of that has a higher volume of derivatives discussion?

We don't talk about other forums ht. But there are some of us here who trade derivatives. Why not start a discussion here? I'll certainly be in on it.

Cheers

 

[Synapse]

Re: Alternative forums?

Hi Randomtrader,

Although there may not be a lot of derivative-specific discussion taking place, I know for sure there are a number of experienced Option traders who are members of this Forum...

Perhaps you could start a conversation by sharing some of your experiences and/or asking some questions relating to what you are seeking?

I am confident you will find some very helpful and knowledgeable people will join in, once they see what your specific interests are...


Kind Regards,

Jason.

 

[Smurf1976]

Re: Alternative forums?

Start a thread on it here I think.

Not that I really know much about the subject, but even though this is Aussie STOCK Forums we've had threads on everything from cars to electrical wiring, currency markets and house prices in addition to those strictly relating to stocks and it's been quite surprising just how many people appear on these threads once they are started.

There does seem to be a lot of knowledge on a fairly diverse range of subjects amongst the members of this forum, different interests in the markets, different personal and professional backgrounds etc. so I think that if a thread(s) were started then in due course people would most likely join in the discussion.

Only one way to find out for sure...

 

[happytrader]

Re: Alternative forums?

I am a shortterm derivatives trader and I'd certainly be in a derivatives discussion if you start one Randomtrader.

Cheers
Happytrader

 

[randomtrader]

Re: Alternative forums?

It's great to hear everyone is keen on derivatives talk. I guess I'll start with my current strategy.
For the last 6 weeks I have started trading options. I've read the books, taken the courses, and just recently, (gulp) taken out a personal loan to daytrade in options. Very, very risky. In my first fornight I made over six thousand dollars. It was October and when stocks went down my income went up. Then I got cocky, I got greedy and I got stupid. The market humbled me ten thousand dollars.
But I don't give up easy. And now I've honed my skills a little more every trade. Taking less risk, less volume (I would buy and sell 20 to 60 options at a time, now it's between 5 and 10), of course making less profit but I sleep better at night.
I've tried daytrading shares and had no luck. I tried short term holding of contracts (3 days to a week) but if the market fluctuates too much or just goes sideways, you can loose quite a bit of money. Usually I wake up, watch Bloomberg, read AFN, sit down for an hour, buy two different options. Then wait, selling around 3 o clock or when I think I get a afair price. Usually I make between 200-500 dollars a day.
Theres more money to be made but I have to be patient.
My no. 1 goal is to retire next year on my 30th birthday.

 

[happytrader]

Re: Alternative forums?

Hi Randomtrader

If think you are doing excellently and you should be patting yourself on the back. I've never known a trader who hasn't been humbled, ever. Looks like we all have to get 'beaten up' first to really start learning. Its really a grownups game isn't? Yeh and it is a game too, a head one. I can honestly say I didn't know myself or how to manage myself before I started trading. I found I had to live in the present not the past or the future. That meant becoming aware of my emotions, acknowledge and use them. Its helped me big time to read people and markets. It takes one to know one I think the saying goes.

I see you trade 2 options. Are they of similar volatility? I used to laugh at the amount of inexperienced traders who would trade the most volatile stocks. No doubt hoping they'd get lucky before they went down. All were warned not to trade NWS and RIO till they had at least six months experience. 'Not' must have meant 'go' in their greedy minds. Most went down not being able to cope with the 40% drawdowns on these. I see you are timing your exit and I guess entries - thats good. I also notice you are grateful for your wins - that stuffs up greed doesn't it? I make around 2-3 trades a week on fairly predictable stocks. I love report and exdividend times for obvious reasons.

I don't spend much time or effort checking the web and news trying to reassure myself of what my trade will do the next day anymore. It will do what it does and thats all about it. I never ignore weekly pricebars and I guess thats what gives me that degree of confidence. If I listened to everything Tom, Dick and Harry had to say and why I'd never be able to act.

Trading is boring but thats good.

Cheers
Happytrader

 

[It's Snake Pliskin]

Re: Alternative forums?

It's great to hear everyone is keen on derivatives talk. I guess I'll start with my current strategy.
For the last 6 weeks I have started trading options. I've read the books, taken the courses, and just recently, (gulp) taken out a personal loan to daytrade in options. Very, very risky. In my first fornight I made over six thousand dollars. It was October and when stocks went down my income went up. Then I got cocky, I got greedy and I got stupid. The market humbled me ten thousand dollars.
But I don't give up easy. And now I've honed my skills a little more every trade. Taking less risk, less volume (I would buy and sell 20 to 60 options at a time, now it's between 5 and 10), of course making less profit but I sleep better at night.
I've tried daytrading shares and had no luck. I tried short term holding of contracts (3 days to a week) but if the market fluctuates too much or just goes sideways, you can loose quite a bit of money. Usually I wake up, watch Bloomberg, read AFN, sit down for an hour, buy two different options. Then wait, selling around 3 o clock or when I think I get a afair price. Usually I make between 200-500 dollars a day.
Theres more money to be made but I have to be patient.
My no. 1 goal is to retire next year on my 30th birthday.

Well good start man.
Don't you think it is a bit early for retirement though. I would only think of that if I had years of success. Keep going for it and thanks for your story.
What options books did you read and what books did find very good?
Cheers
Snake

 

[randomtrader]

Re: Alternative forums?

What options books did you read and what books did find very good?


I couldn't name all the books, one was 'Trading stock options and warrants' by Chris Temby, although this went on to explain writing strategys, something I'm not ready for. Probably the most helpful book was Introduction to the Stock market by Rene Rivkin's son (can't think of his name). When I started out I didn't even know what a share was and this book broke it down to basics. Rouge Trader by Nick Leeson was inspirational. All the money he lost was from writing and buying wrong options.
The best help I got was from a one day seminar, cost $400 and I learned more in one day than two years of reading.

I see you trade 2 options. Are they of similar volatility

A majority of the money I lost was from buying options that wern't being traded. If an options cheap, it's cheap for a reason. Now 90 percent of my buys are Commonwealth Bank and BHP. Occasionaly NAB, RIO, WBC. If none of these stocks are moving much after the first hour of the market opening, I turn of the computer and play PS2.

 

[happytrader]

Re: Alternative forums?

Hi Randomtrader

That's the best strategy I've seen on this forum.

Cheers
Happytrader

 

[wayneL]

Re: Alternative forums?

So randomtrader, let me get this straight.

You are daytrading, using options, yes?

 

[wayneL]

Re: Alternative forums?

RT, you wanted derivatives discussion so here goes;

So you are daytrading options. Obviously picking direction and trading to that.

In other words you are trading delta.

A tip for position sizing; determine your total position delta (delta x 1000 x no. of contracts) This will tell you the equivalent position size in pure shares.

Example if you bought 10 ATM call contracts with a delta of .55, your position delta would be 5500. This is the equivalent of buying 5500 shares.

But one thing strikes me, not tying to be harsh here, but, if you are trading delta , why didn't it work with shares or cfd's? Why suddenly success with options? The ONLY advantage you have with options, the way you are trading them, is positive gamma, if gamma is high enough to become a factor in intraday moves.

Like I say not wanting to be a jerk, but seeing as you are trading with borrowed money, you really want to know your risks here.

Cheers

 

[randomtrader]

Re: Alternative forums?

But one thing strikes me, not tying to be harsh here, but, if you are trading delta , why didn't it work with shares or cfd's? Why suddenly success with options? The ONLY advantage you have with options, the way you are trading them, is positive gamma, if gamma is high enough to become a factor in intraday moves.

When I buy an option I go on the news and information of the stock, the overseas market, expiry and a fair price. I don't look at delta because I don't fully understand hiw to use delta to pick an option. However thank you for explaining it, it has shed more light on the subject.
Day trading with shares never made me profit because I had to spend too much money on buying enough shares that would move 1 or 2 percent, sometimes making just enough to cover brokerage. With options a 1 or 2 percent move gives a lot more profit.
I wanted to choose between CFD's or options, there was no reason why I chose one over the other, I will be starting on CFD's next year.

Can anyone tell me what the major differences are between the two?

 

[wayneL]

Re: Alternative forums?

OK so you are using them for leverage. Fine, so long as you have money management in place

Can anyone tell me what the major differences are between the two?

That would take many pages, but as a start:

Always think in terms of the greeks when comparing options.

Delta. CFD's will always have a delta of 1.00 or -1.00 If you are long a CFD and the share goes up 10c then your CFD will go up 10c basically. The opposite if you're short. (Short CFD's have negative delta)

However, call options will always have a delta of less than 1.00 (unless way way way in the money) for example an ATM call option has a delta of about 0.5. That means if the share goes up 10c, the option will only go up 5c.

The exact opposite for puts. Puts have negative delta.

If you are trading delta, them your risk can be directly measured by position delta as mentioned before, as well as with gamma but thats for another time

Options are not only affected by price (via delta), but also gamma, theta, vega (implied volatility) and sometimes rho.

CFD's are not subject to any of these.

You will also usually get a better spread with CFD's. A big factor if daytrading large parcels.

Cheers

 

[randomtrader]

So which do you prefer and why?
Are CFD's easier to understand and trade than options?

 

[wayneL]

So which do you prefer and why?
Are CFD's easier to understand and trade than options?

Depends what I'm trying to do.

I don't think options are the ideal daytrading instrument. I use futures for that, but you can use CFD's just the same. Much easier to understand and trade.

But get to know options properly, and a whole new world opens up. It's a long journey aquiring the knowledge. Especially if someone is of average intellegence such as myself.

As an example, see this thread as one particular way you can use options, one of a myriad of strategies.

Not advice!! Just opinion!!