A rather boring day, I think, in the markets, with some more steers led into the rally in the morning and some profit taking in the afternoon. The market finished down, pretty significantly, in fact, if you look at the S&P 500 (-0.9%). Airlines, along with healthcare, were major winners today on the short side.
Personally, I’m tempted to call it a week after yet another monster day. The major bull positions from yesterday made some more money today, and my opening puts on [[ALK]] turned into my largest realized gain ever (400%)!!! The only things not working seem to be the long straddle/volatility plays (large swings in both directions; no decided direction), although the short straddle in [[TMA]] is settling nicely into profits as the underlying looks to consolidate in the $2.50-3.00 range.
DP Buys:
- OTM puts in [[ALK]]. See previous post for details.
- Puts in [[CWST]] – (had pulled back to downtrend line @ $10.50).
- Calls in [[TUP]] – (held support yesterday while printing a very bullish candlestick). Limit order filled just above yesterday’s high.
DP Sells:
- The remaining calls in [[MON]] were stopped out on the 30% trailing stop.
- Same was true for [[VPHM]] puts. This was a small position and booked a tiny loss.
- Sold ALK puts on market close, as mentioned in the intro. They were well ITM at this point. The largest gains in options will always be booked when they go from OTM->ITM, which was once again proven here.
- Sold all [[PCLN]] calls at market close for another 100%+ gain.
Do you have any more option plays you’re watching for the coming days that you haven’t initiated yet? I’ve been messing with calls and puts in the QID and QLD but they are not liquid enough and I am getting killed with the spread. It seems like you like to swing trade the options, not holding them for more than a couple days or even just one day. This is very similar to what I like to do as I am very impatient. I have only been trading options for a couple months so I am definitely still trying to get a feel for the way they trade and are priced and repriced. I made some good money trading FXP calls last week, however, the swings in those babies are huge and it is very easy to get shaken out.
You’ve hit the nail on the head with the problems of trading options on ETFs.
The QQQQ, QID/QLD, GLD, SDS, SPY etc. move way too slow for my liking. They have incredibly high volumes (for options), but the rewards take way too long to arrive.
The likes of FXP, SKF, XLF, on the other hand, are highly volatile and it’s easy to get shaken out. The only way I ever play these is to buy OTM in anticipation of a move. I would make these positions small enough so that the entire position equals the max. allowable risk.
If the move comes true, the profits can be very good. If it does not, you take the loss (which, at worst, is the max. risk that I allow myself). But you have to be careful of overtrading these type of trades, as they can very easily and quickly deplete the account.
The only ETF I’ve ever had consistent success trading has been EWZ. The swings are not as wild as other foreign ETF, but they’re larger enough to make options viable. I’ve traded the Q’s a few times as well, but only when I really found no better opportunities/setups. The Q’s are a good place to buy options if you’re looking for low risk/low profit trades.