matthewspeed asked:
(Note: I have real money encounter with choices going back to 2000, first covered calls in my IRA and then lengthy calls in my money account although no day trading encounter with real money. I have the 25K to park in an account to satisfy the pattern day trader guidelines and an additional 10K to make the actual contract purchases.)
I have a job that allows me to maintain an eye on the real time stock marketplace. Starting in January I started playing with the Virtual Trading engine at OptionXpress, daytrading choices on SPY. My technique is rather modest I purchase 5-10 ITM contracts, either put or call depending on marketplace direction, and sell when I see the trend reverse. I chose 10 contracts simply because I believe that with an order size that little, if I submit a sell order at the bid it ought to fill immediately unless the marketplace is moving extremely fast allowing me to lock in a profit if the trend reverses. I open 1 position at a time, I by no means leave my desk with an open position and I am 100% money at marketplace close each and every day. I use SPY simply because being a basket of 500 stocks it is buffered from sudden drastic moves in cost giving me time to get out of a position with minimal loss if the cost goes the wrong way on me. My immediate objective is $100 following commissions per round trip, a target that demands only a $.15 move in option cost. I don’t usually guess right on direction, 4 out of 5 is typical, and I am netting among $400 and $500 a day on 6-7 round trips. My $5000 initial play money stake has grown to about $15,000 because 1/19 when I started doing this seriously. I won’t get rich doing this but over the course of a year that is an extra person’s worth of income for my family. If it lets me do absolutely nothing much more than pay off my home and fund future college for my 3 kids it is worth it.
Now that I have proven to myself that this appears to be a reasonable technique I am trying to comprehend what I can do better and am now in the region of “I don’t know what I don’t know.” I know about Level 2 quotes but if these are something that can help me I am not clear how to use them. I know that there are all sorts of indicators that technical traders use but I don’t know if these scale down to the day trading level. I know about the existence of the Greeks, and while I comprehend roughly what the numbers and equations mean, I don’t know if these will help me on positions lasting 15 minutes or much less.
My primary interest in posting this question is to find out if there are tools I can use to help me make better options about getting in or out of a position or tell me much more about what the marketplace is doing. This technique appears to be working okay and if I can translate this to real money I will think about myself successful. I don’t want to be greedy but I definitely would like to know if I can do what I am already doing much more successfully.
I spent time on 888options and optionetics.com but it appears a lot of the content out there deals with methods like spreads, butterflies and condors, issues that simply don’t apply to what I am doing. I know there are choices day traders, even some specializing in SPY, who read these concerns, and I’d be appreciative if I even had a list of books or even just some issues to go research and learn about that you have found useful in your encounter.
Thanks for reading this far and any help y’all provide.
I definitely comprehend the problem with fills in reality, I asked a question about that here the other day. I had noticed that I could put in a sell at a cost like 3.10 and a minute later see a bid/ask spread of 3.15/3.20 with my sell order nonetheless open. My only thought was “What the ****?!” I was told by an additional answerer that in reality, on an order that little an ask below the bid would by no means stay open on something as liquid as SPY.
Concerning filling at the mid, on SPY I could live with this. The choices on SPY move enough intraday that even if each and every purchase order filled at the ask and and sold at the bid I’d nonetheless make money simply because I am looking for moves of .15 on choices that can move .30 or much more in a short time. I’ve gotten good enough at picking the trend direction that I will purchase choices that are 3 or 4 points ITM. This gets me my .15 or much more move with only a little move in the cost of SPY.
