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