December 10, 2008
Option trading question?
pps p asked:
Hello, I understand that first of all we need to know how the future price of the Underlying security is going to be bullish or bearish or neutral…..Then after finding out the trend we have to select the strategies…..I am really having trouble here in really correct trend…..
Hello, I understand that first of all we need to know how the future price of the Underlying security is going to be bullish or bearish or neutral…..Then after finding out the trend we have to select the strategies…..I am really having trouble here in really correct trend…..
If you are successful option trader How do you come to conclusion that you are going to bet the price of security is bullish or bearish or neutral?What Kind of analysis you do?Do you use put/call ratio like something as a Indicator for confirming the trend?Please share your ideas How to Jump to conclusion to bet that product’s price will be bullish or bearish or neutral?Please explain to me in simplae and clear way……I do not have trouble in selecting the strategy after find the trend ie, bullish or bearish or neutral……I need some experienced Option trader’s confirmation for the basement of selecting the trend?
Thank you.
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Comments on Option trading question? »
what works for me in the last couple months is to enter the market exactly at 9:30 in the morning and play some small options orders (calls and puts) to make a small (but cumulative) profit off the fluctuating morning rush.
So you want to live life in the fast lane?
You need to make informed decisions with options or you will loose your money faster than you could ever imagine.
You need to be able to identify the trend that a stock and lately that the market is in. Seems lately the news in general is the most important factor but it should be news on the company you are looking at.
You need to be looking at what the stock is doing graphically, is at , above or below it’s 30 moving average. Some might say 50 or 90 day but for options look at the 30 day. You need to look at MAVD and stocastics. Is it over bought, over sold? What is the open interest in the option? (The more open interest the more it is worth)
How is the company doing compared to others in it’s segment? Is institutional money going into the segment or not? What are the fundamentals of the company?
Lousy fundamentals, news, downward trends are easy indicators that you may want to go with puts. Good news, fundamentals etc. you may want to look at calls.
Big money comes when you buy out of the money puts or calls and they move into the money as you predict. Go wrong and they can go out of the money to zero.
Both puts and calls decay with time. There are all kinds of things you can do with different amonnts of times into the future. Leaps, combinations of puts and calls . With the market the way it is these days I recommend you concentrate on the current month, both puts and calls on the same equity (a chicken trade) make your money on the move one way or the other and the loosing trade is nothing but the cost of insurance.
You as an individual have no control over the outcome…you are just a surfer on a wave. Get in, get out and remember the old adage: Pigs get fat, hogs get slaughtered.
Some of the sources below may be helpful to you.
I think your understanding is incorrect. Many, probably most, professional traders like “delta neutral” spreads and do not care if the price of the underlying security goes up or down.
Everyone has trouble determining trends correctly. People who put too much faith in their own ability to determine trends usually are the biggest losers in option trading.
For the most part I simply “go with the flow” and “don’t fight the tape.” If the price is going up, don’t bet on it going down. If the price is going down, don’t bet on it going up.
No.