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I typically day trade in options according to spot price action.
as this gives me
- Theta decay
- Less expenses (turnover charges are very less in options)
So is there even more stronger reason to trade in futures instead of trading in option (acc. to spot price action)
Course members please share your views on this topic
In my experience trading bull put spreads for 2 years, about 10 years ago, the risk was hard to contain as price moved very quickly (relative to the underlying). Did I miss something (do you not find them very risky?) So, I wasnt comfortable with the huge potential losses. If I tried to early exit to cut the loss, I would usually miss much of the later profit. Did I miss something (do you not find them very risky?).
How much cheaper do you find are the transaction costs than say the futures for, say, the S&P500?
Thank you very much graeme brindley for the reply,
Now actually what I meant is some thing like this ....
Lets say you saw an bearish setup in spot in 5min chart and the stop loss is the signal bar high
so what I do is I sell the option (ATM Call) and put the stop loss on the signal bar high (as similar candles form on the option chart like the spit chart) so in this way the risk is I think the same as we are putting the same stop like spot but the benefit is of THETA DECAY
More over talking about transaction cost (brokerage + turnover charges + all other gov. charges) I did a calculation and found that the charges to trade in futures are 4 times more then options
You are a wise man. I have been selling puts and calls on the futures market and I was doing very well. that was until today. I sold 3 out of the money puts at 63 61 1nd 53 and after todays drop in oil I am down 4,000. Looking seriously at closing two of the three puts Monday morning. The rewards can be very good but the risk can be devastating.
How much do you receive for selling the call and what is the expiry date on the call you are selling. If you are selling a call you want that time to decay. That's you best friend if that call is out of the money. If it's in the money you are in a world of hurt. Do you have a chart with an example?
You are a wise man. I have been selling puts and calls on the futures market and I was doing very well. that was until today. I sold 3 out of the money puts at 63 61 1nd 53 and after today's drop in oil I am down 4,000. Looking seriously at closing two of the three puts Monday morning. The rewards can be very good but the risk can be devastating.
But didn't you put the stop loss?
How much do you receive for selling the call and what is the expiry date on the call you are selling. If you are selling a call you want that time to decay. That's you best friend if that call is out of the money. If it's in the money you are in a world of hurt. Do you have a chart with an example?
I sell the current week expiry call / put according to the setup (on the spot chart)
I have noticed over the years, oil has good range, but occasionally moves too far too quick - for me, better to stick to the more conservative instruments.
Okay, i didnt think of that method, but i think you would have to manually exit the options when the underlying stops out, (because moves in the underlying are somewhat different than the options), right?
He probably does. The thing is what instruments have enough liquidity in options to do that in 5 minutes charts? I think the ES does. Would you share a picture of the underlying and the option chart for us to see?
if you are replying to me, if he manually exits the options as soon as the underlying stops out, it adds a degree of extra effort because you have to be watching the screen(s) or manually responding to alerts. Right?
Okay, i didnt think of that method, but i think you would have to manually exit the options when the underlying stops out, (because moves in the underlying are somewhat different than the options), right?
Hi graeme brindley Alan Cavalcante
as I already mentioned about this that
```so what I do is I sell the option (ATM Call) and put the stop loss on the signal bar high (as similar candles form on the option chart like the spit chart) so in this way the risk is I think the same as we are putting the same stop like spot```
Below image is of 1min chart of the underlying option
Ok. Got it.