$SPY #Options #DayTrading – FED CALLS an hour rally, then it’s all ka-PUTS

Today was a Federal Reserve open market pronouncement day. Pretty much as expected, no change in rates and no likely raise of rates at any time in the future.

One would think that’s pretty bullish, and it was for an about an hour (see the CALLS chart below), but like a lot rally days recently there’s a sell-off into the close (see the PUTS chart below).

When the market doesn’t charge ahead on so-called good news, it is not good news and it could turn bad in a hurry.

FIRST OPTION PLAY: THE CALLS

SECOND OPTIONS PLAY: THE PUTS

A SIDE NOTE ON THE PUTS PLAY:

Had that stayed with the initial breakeven and held to the close the second half would have been up around 130%. Them’s the breaks.

(click on the chart for a larger view)

#OptionsStrategy – #DayTrading $TSLA strangles

“No one can day trade stock options!” an irate administrator of a Facebook options trading group told me back at the beginning of the year.

His group was centered on “investment income using options.” He was basically doing covered calls or puts, rolling them forward when necessary, in an effort of adding ten or so percent to ownership of the stocks themselves. Fine.

I just happened to blunder into the group day trading SPY calls and puts for ten times that return. I don’t know if it was the returns or, as he said, his belief the practice was so risky I should not be suggesting it anyone.

I argued there were ways to control risk and he might want to open his mind.

He didn’t want to evidently since he blocked from the room.

Well, at the time I got tossed, I thought maybe he might right – after all, trading SPY options was not the same as stock options. As the most popular ETF its option were extremely liquid, with tight spreads, and three expiry days per week. I’ve chronicled much of the SPY trading in posts below so I won’t get into it anymore in this one.

Stock options didn’t have those qualities but some came close – AAPL and FB particularly, others like NFLX, NVDA. The trouble with each of the stock-option trades, however, was that not only did one have to get the direction right for the day (it is a call or a put?) but one also had to have enough movement to make it worthwhile, and then each trade needed to be monitored pretty much constantly all day.

What I was after was a strategy that could be put on early and ignored to the end of the day unless it hit a stop loss during the day, at which time there might have to be a reentry if there was still time to reap some reward.

The trouble with even the best stocks like AAPL, FB, etc. was there was usually not enough bang for the buck in a single day.

Then along came TSLA.

It didn’t take to discover TSLA weekly options were as good as it gets for day trading short strangles, lots of premium, a big range of movement and enough liquidity to fairly easy to put on the trade and, most importantly, to get out of the trade.

In a short strangle, one is playing time decay (theta) every day on the strikes both above and below the stock’s price at the start of the trade.

And one has to keep in mind that shorting options naked (without owning the stock) requires considerable margin buying power – one ends up needing to put up $30K to $50K to maybe make $500 on some days. That might not seem worth it, but the ringer in a day trade is it’s the same margin every day and stays the same as the daily profits pile up all week long. Oftentimes, the day by day ends up making double-digit on the margin requirement for the week (see the green cells in the table below).

Using a tight stop (like $200 per contract) and selecting the right spread of strikes prices, significant returns can be had in a month.

For August, the TSLA short strangles yielded $18,800 per contract on a maximum margin requirement of $50,521 per contract (as prescribed by the CBOE MARGIN CALCULATOR, a 37.4% return for the month (see the yellow cells in the table below).

That’s without having to know what TSLA was going to do on any given day in any volatile month of wild price swings.

(click on the table for a larger view)

#DayTrading $SPY #Options – Buying calls and puts

The contents of this post appeared here last on June 11th. I’m lifting it intact because nothing ever changes in the strategy.

There are so many options strategies in the stock market the head spins – a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

But buying options…

Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks, there are only three things that can happen – the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game, like everyone in options trading says?

For day traders
it doesn’t have to be. If the trader is persistent, disciplined and experienced, it almost never is.

Let’s take SPY options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for scalping on any time frame intraday.

Again, the key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable taking.

$SPY #Options – #DayTrading a day to “put” on the record

A day in the SPY 317 put, expiring Friday, 7/10.

FIRST TRADE HALF UP 53%:

EXIT SECOND HALF OFF 230%:

SECOND TRADE ENTRY:

FINAL EXIT HALF UP25%, SECOND HALF 12%:

$SPY #Options – #DayTrading Friday 6/26

Didn’t get around to compiling this blog entry Friday nor over the weekend. Was a bit numb from action of the day. Pleased, of course, since it was another dazzling day down to end the week.

Posting today (6/29) to as a record for this blog.

See the tweets below for the entries and results of the trades Friday:

FRIDAY’S 307 PUT AT 2.00. RESULTS: HALF UP 125%, SECOND HALF UP 175%.

FINAL TRADE FRIDAY’S 305 PUT AT 3.14. RESULTS; HALF UP 50%, SECOND HALF UP 63%.

$SPY #Options – #DayTrading Puts on a dazzling down day

SPY today dropped below its open twenty minutes into the day and never looked back.

So as day trading SPY options went, and at the risk of oversimplification, it was basically buy the blue, sell half into strength, cover on the rest on the yellow, rinse and repeat using ever lower strikes.

See the chart below for the color coding.

First – the 311 put, expiring today, for a 70% gain on one half, and a 50% gain on the second half.

Second – the 309 put, expiring today, for a 100% gain on both halves.

Third – the 305 put, expiring today, for a 50% gain on one half, and a breakeven on the second half.

This is what one always wants day trading options, a trending day down.

FIRST ENTRY AND EXIT

SECOND ENTRY AND EXIT

THIRD ENTRY AND EXIT

AND FOR GOOD MEASURE THERE WAS THIS EXCHANGE TODAY:

(click on the chart for a larger view)

$SPY #Options – #DayTrading Puts for a 28% gain late

The SPY 315 put, expiring Wednesday, triggered two trades today, one early and one late.

Tweeted the first trade entry at and exit 2.77 as it stopped out at breakeven after a tiny bounce. From then on the SPY hugged its doji open line virtually all day before signalling another buy on the 215 put for the final hour’s flush down and a 28% at the close.

Not much more to say except it was a pretty boring sideways day after the opening gap.

See the chart below.

(click on the chart for a larger view)

$SPY #Options – #DayTrading today’s calls for a 50% gain

The SPY 307 in-the-money call, expiring today, netted 50% for the day trade despite the initial entry being stopped out once at breakeven.

See tweet time stamps and the chart below.

FIRST TRADE ENTRY

SECOND TRADE – REENTRY

FIRST PROFIT TAKING

CLOSE OF DAY TRADE

THE STRATEGY

There are so many options strategies in the stock market the head spins – a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks, there are only three things that can happen – the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game? Like everyone in options trading says?

For day traders it doesn’t have to be. If the trader is persistent, discipline and experience, it almost never is.

Let’s take SPY options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for scalping on any time frame intraday but that, as they say, is another story.

Again, the key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable taking.

Today, again, was a fine day for the strategy.

(click on the chart for a larger view)

#DayTrading $SPY #Options – simplifying today’s put buy and sell for a 237% gain

The 315 in-the-money put, expiring today, netted 237% on the day-trade buy signal near the SPY open with a sell of half at up 215% and the second half at up 260%. Had the trade been held to the close, it would still have netted approximately 220%.

See the tweets (for time stamps) and the chart below:

THE STRATEGY

There are so many options strategies in the stock market the head spins – a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks, there are only three things that can happen – the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game? Like everyone in options trading says?

For day traders it doesn’t have to be. If the trader is persistent, discipline and experience, it almost never is.

Let’s take SPY options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for scalping on any time frame intraday but that, as they say, is another story.

Again, the key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable taking.

Today, again, was a spectacular day for the strategy.

(click on the chart for a larger view)

#DayTrading $SPY #Options – today’s puts for 131%

Today’s gain on two trades — 131%.

The in-the-money 315 put, expiring today, was in play triggered by a five-minute bar below the SPY open. See the chart below.

There are so many options strategies in the stock market the head spins – a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks, there are only three things that can happen – the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game, like everyone in options trading says?

For day traders it doesn’t have to be. If the trader is persistent, discipline and experience, it almost never is.

Let’s take SPY options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for scalping on any time frame intraday but that, as they say, is another story.

Again, the key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable taking.

Today, again, was a spectacular day for the strategy.

(click on the chart for a larger view)