(CLICK ON THE CHARTS FOR A LARGER VIEW)
TSLA at the end of the day – net up 94%.
BABA at the end of the day – net up 52%.
AAPL at the end of the day – net up 14%
NFLX at the end of the day trade – net down 43%.
Don’t quite have it together yet, but am working on developing a strategy to day trade stocks mostly because I’ve been told it can’t be done.
It is based on the basic idea of buying calls and puts as a simple way to play options, calling it, tongue in cheek, “the Fool’s Game”:
The game has been played mostly with SPY options for the liquidity, the three-times-a-week expiration days, and the measure of market breadth they provide.
But what about stocks?
They have to be liquid and as close to expiration as possible – weeklies. And they have to be big prominent popular stocks. To start off I’ve selected AAPL of course (it practically is the market on a weekly options basis), and FB, BABA, NFLX, TSLA. All solid, sometimes big, movers. But even with these one can’t eliminate the randomness (sometimes they move with the rest of market, sometimes they don’t) and the risk of news out of the blue related solely to the individual stock itself.
Still, as the great market wizard Trader Vic Sperandeo once said: “if it moves, I’ll probably try to trade it”
So stock options on a day trade using strikes close to the money on the open and closed at the end of each day. As I said above not completely confident in this but today TSLA gave a glimpse into the possibilities. This is a strategy for day trading, but it is likely it will be more suited to scalping.
On the chart below, I’ve color-coded my buy and sells signals (each trader needs to work out their own). Simply put, I say to myself “buy the yellow, sell blue.” In TSLA today, a trade set at $10K (to easily show the percentage gain) in the nearby out of the money 295 call (TSLA opened at 292.11) resulted in a 74% gain ($7,400) in just under two hours, a scalp sort of…
I suspect today was a best-case scenario but maybe not…
To be continued…
Here’s a sneak peak as possible a best-case
No surprise today’s rapid bear-market rally notched the 35th trending day of the year in what I call “the fool’s game” – buying calls and puts solely as day trades.
With SPY opening at 269.60, it was today’s expiration in-the-money 268 call that trended all day to a 203% gain on the close, $20,331 on each $10K traded (see the chart below on the left). Today’s at-the-money 269 call trended to a 336% gain (see the chart below on the right). The key to these gains is trading strikes nearest to expiration with the choice between in-the-money and at-the-money (or out-of-the-money for that matter) being entirely up to an individual trader’s risk tolerance.
Trending days obviously are the days when all the profits get booked. The rest of the trading days have resulted in net losses overall. Losses on their own that are rather huge.
This is a highly risky strategy that takes extreme measures of persistence, discipline and experience to execute.
When something looks too good to be true it usually is.
But so far not this year.
The day-trading strategy developed here last November and dubbed in earlier posts “The Fool’s Game” has now had 32 days like today since the start of this year.
Thirty-two trending days.
I define a trending day as any day the SPY calls or the SPY puts or a combination of both gain more than 100% on the day trade. All trades are long only. The 276 in-the-money put for today closed the day trade up 166% on each $10K traded (see the chart on the left below). There were no trades triggered in the calls.
This was one those great trending days that goes one way all day.
And by the way, the market, with today’s hard sell down, is now wildly oversold so the chance of bounce tomorrow is very high. I say that chance is about 85%, but that’s mostly a guess based on the past six months market action. No telling how high. There’s also about a 75% chance the bounce will be a one-day wonder.
For fun, I’ve included a chart of the “at-the-money” 277 Put for today below on the right just as a comparison between one strike and another on a day of expiration. The gain per $10K traded, $25,384 (also the percentage gain, 253%) is in the white flag on the lower right of the chart.
Obviously, the greater the risk the greater the reward.
Remember these posts are meant solely for entertainment purposes and for the educational purpose of showing what the possibilities are in options if one has persistence, experience and discipline. They are in no way be construed as any kind of direct or indirect trading or investing advice.
When something looks too good to be true it usually is.
“Usually” IS usually, but so far this year not this time. This day-trading strategy developed last November – dubbed in earlier posts here “The Fool’s Game” – has had 31 days like to day since the start of this year.
A trending day.
I define a trending day as any day the SPY calls or the SPY puts or a combination of both gain more than 100% on the day trade. All trades are solely long. Today was up above up 125% despite the 56% loss on the calls at the beginning of the day as puts ran hard into the close (see today’s color-coded charts below).
Think about that for a moment…31 days of 100% or more, a $10,000 or more profit on each $10K traded. As they say, “that’s a lotsa money!”.
Good thing too because on the 178 trading days so far this year that did not trend, the strategy has lost money. The biggest draw down was 640%. That is not a typo, $64,000 trading $10K every day.
Obviously day trading options, any options strategy, has to be with no more than a fraction of anyone’s total capital.
I’ve learned some market rhythm day-trading the closest in-the-money strike on the nearest expiration I never knew before. Friday’s are truly freaky gaining 48% of all the money for the strategy on the year, with Monday Monday being good to me too, racking up 28% of the profits; Wednesday follows with 24%, Thursday with 15%, and Tuesdays absolutely suck, barely in the black at 1%.
And no matter what this takes persistence, discipline and years of experience.
Did I forget to mention the staggering total amount trending days have made so far this year over and above the losses on the non-trending days?
–The 291 put, in the money, and up 100-plus percent at the moment…
The total per $10K traded (also the percentage gain) is in the white flag on the lower right of the updated chart below.
My definition of a trending day is any time the trade in the calls, puts, or a combination of both gains more than 100%. Today’s put may not hold to the close at more than 100% but it has touched that level for the second day in a row (yesterday it faded to just under 100%).
(right click on the chart for a larger view of this UPDATED CHART)
Pretty great day in the gone-long options world.
Bought the Wednesday 287 call based on the immediate post below speculating that today would be a turnaround day suggested by history and by David Bergstom’s analysis at the “See It Market” site.
Several notable stocks were also up more than 3% from the open: NFLX, AMZN, BABA, and AAPL almost at up 2.95%. TQQQ, the Nasdaq 3xLeveraged ETF, was up 3.8% from the open.
— The God of Trading (@TheGodOfTrading) September 11, 2018
Shared the chart below of AMZN around the internet after the close last night with the suggestion that this was an obvious setup to buy puts or sell calls.
It was prompted by this post here yesterday:
The idea was that the stock would continue its stumble today (and maybe for a week or so). See the blue boxes marking the spots on the chart when that has happened before as it comes off overbought (the yellow color coding on the chart).
Since long-term breadth had just turned down after a long run up and everything in the market was pretty much overbought, it was likely there would also be market pressure on the stock besides it being overextended on its own. Then there was that history thing in play again – the best indicator of all since it repeats or rhymes or whatever but it mostly whispers what’s going to happen next again and again.
It was a trade for today’s open. The most aggressive and least expensive entry would be an in-or-at-or-just-out-of-the-money put expiring Friday.
I coulda and probably shouda but I did not trade this. In general I don’t like stock options, don’t like the spreads, don’t like the lack of liquidity when it’s time to close it out, don’t like the complications (all those Greeks and spread strategies). I like my options trading plain and simple – it either goes up or it goes down, it is either a call or a put. I trade SPY options.
I threw this out there last night for entertainment purposes primarily, and, as it turned out, it turned out to be quite instructive for anyone who does like stock options. To each his or her own way to play these money games…
AMZN had a big move down (as history whispered it would). The 1995 Put, expiring Friday, from the open peaked during the day up 260% and ended the day up 161% (see the companion chart below). That’s somewhere between $26,000 and $16,000 on a small $$10K capital commitment. Not bad for a day trade? This could drop more tomorrow making that put even more profitable but come on…it’s a home run with no need to risk an overnight reversal.
And besides, moves like this happen again and again, nearly everyday, somewhere in the market.
I didn’t even notice TWTR. Market-timing, options-trading bears must have made some serious money there today.
Just a quick note on the $10K SPY options day trade for Thursday.
The long signal triggered just after the open and rose to a 97% peak (see the chart below) and closed the day up 26.7 percent, $2,670 for each $10K trade (see the white profit flag on the lower right). The is the day trade, start to finish.
Note, though, I consider a 100% gain a “trending day”, which are obviously the most important days to capture. Had this position passed above that threshold it could be locked in that profit level with a trailing stop. Just missed it today. Shucks!
However, it also should be noted that light blue candle after the peak on the chart was a chance to take at least some profits – the $10K was up 56.9% at the point. Short-circuiting the day-trade has not be more profitable over the long run this year than just letting it ride, but there at times when it just looks so obvious…
These trades are all day trades, either in the nearest in-the-money SPY calls or puts (in this case the 283 call, expiring Friday, and are closed at the close of each day. There was no signal for the puts today but on some days there are both calls and puts in play. My entry signal is proprietary, and should be tuned to any individual trader’s courage and risk tolerance.
Keep in mind, these posts are only for entertainment and educational purposes and should not in any way be construed as trading or investment advice.
I came into today expecting a sell-off in the general market.
It didn’t happen, at least not right off the bat. At the end of the day, it sort of sold down in a way that may mean the market “plop” I suggest yesterday will come tomorrow.
For the past three days the market has been in a very tight range – for instance SPY opened Tuesday at 285.39, opened Wednesday again at 285.39 and today at 285.53, a total range of 14 cents in three days. This might be great if one is selling SPY options but I don’t even look at the short side naked because it takes too much margin. Instead in what I’ve been calling, tongue-in-cheek “the fool’s game,” these three days have been yuck. I mean PURE YUCK!
Today was a little loser again.
Because I’ve been posting winners, primarily to explore the potential of day trading SPY calls and puts on the long side (“the fool’s game”), I’ve been met on the internet as expected by a chorus of naysayers who believe what I’m saying is far “too good to be true.” So I’ve decided to post this loser to reassure that while it is good and it is true it is not every day.
Today’s loss came from trading $10K on each trade, first the 284 call, expiring tomorrow (see the the chart on the left below), then the 286 put on the day-trading reversal. The call lost 22.8% percent on the $10K trade, $2282. The put, which was deeply underwater most of the day (see the white profit histogram on the chart on the right below), managed to surge to a .9% profit on the SPY sell-down into the close, $958. Total loss for the day was $1324 for $10K traded, 13.2% for the day.
That 22% loss on the calls and the 13% loss overall is why money management is most important in trading anything, especially any strategy like this. It is intended to be traded small versus one’s overall portfolio and traded everyday.
The tight range of the past three days suggest SPY could go big either way tomorrow. My hope is it will be a trending day either up or down since the real money here is made on trending days, usually days of options expiration like Friday (in fact, YTD Friday’s have been the best days of the week), or like last Monday…
Monday’s SPY 283 call (see the pattern on the charts) trended all day. As a result, the profit for week remains at 57% despite the yuck, yuck chop of Tuesday, Wednesday and today.
As a great, wise film fool once said: “That’s…