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Registered User
Joined: 4/18/2005
Posts: 4,090
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Those of you who play options what are some of the more favorable ways to enter a trade? Market, Limit, stop limit?
for stock trades I normaly use a stop limit slightly ahead of price in the direction I Think price will go. That way If i'm wrong and price goes the other direction I generally havent risked any money because the trade didn't trigger. the exception is whipsaws where price runs up to hit my order then runs the other direction.... but those aren't as common. I'm just wondering if this seem sensible to an options entry strategy.
tomorrow I intend on papertrading NYX puts in the morning and exiting when price hits 73.00 or close there abouts. While NYX is in a down trend this recent move up and the one in July have me thinking that NYX could start forming a bottom here.
Reguardless, stocks don't usually make hairpin turns to reverse trends so I think the above is more than likely a reasonable trade to put on . 20 contracts will bring a bit over 6k if that trade comes off. Perhaps more I closed the software that calculates options movement for me.
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Registered User
Joined: 6/8/2006
Posts: 58
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Hi Scottnlena
I have to say that options are a whole other ball game to stocks. Technically speaking, if you're in the money then your options should go the same way the stock does but the marketmakers puff them up. (Implied volatility) I have bought options and had the stock go where I expected it to go and watched in horror while my option went south as the market maker let all the hot air out of it.
Be careful, they are much more volatile than the stock and you can get whipsawed out really easily.
Cheers
Muniyba
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Registered User
Joined: 4/18/2005
Posts: 4,090
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you know I've noticed that often they aren't as liquid as the underlying. In some cases the Underlying was moving up and At the money calls were moving down !
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Registered User
Joined: 6/8/2006
Posts: 58
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You need to check out the Open Interest.You don't want to own the market in a particular strike. Also check out the Implied Volatility vs the Historical Volatility
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Registered User
Joined: 9/14/2007
Posts: 38
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Muniyba is correct to say that open interest is very important to look as well as the option volume. Just like in stock you wouldn't want to buy a stock that trades with a volume of 1000 shrs.
If you like to know how your option performs compared to $1 increase in the stock price you need to look a "Delta". Furthermore if you like to know the amount that "Delta" changes as compared to a $1 increase in the price to the stock then you need "Gamma". The Volume and Interest will not give you the volatility of the option. For that you need "Vega"
Study your Greeks.
good luck.
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Registered User
Joined: 10/9/2007
Posts: 11
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But is it at all possible to see this information inside telechart?
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Registered User
Joined: 4/18/2005
Posts: 4,090
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you know i'm not touching options... they are to random. I'm considering stopping trading alltogeather.
I'm sick of haing mediocre gains which I struggle for then waking up one morning to find that one of my stocks gapped down several points and unraveled the gains for that month.
this isn't really any less risky than gong to a casino, except the payoffs aren't as big.
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Registered User
Joined: 6/8/2006
Posts: 58
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Hi Scottnlena
It's easy to get discouraged. I have the same feelings and I'm now taking it much much slower. I'm erring ont he side of not letting my profits runs so that it doesn't reverse on me but I'm taking small gains off the table - and small gains add up. This isn't a get rich quick scheme, that is gambling. But if you find a system that can give you consistent small gains then as you add to your total and your capital increases your gains become larger.
Why not paper trade a few systems for a while and see what works.
All the best
Muniyba
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Registered User
Joined: 4/18/2005
Posts: 4,090
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you know, I came up with a system that works quite well in most cases. However it's very hands on, high maintenance. It asumes all trades are "momentum" type entries .. and just like you I take allot of small gains. Many of my exits are marked as premature exits... but you never really know at the time.
In 06' i traded like a rock star and hardly knew what I was doing. But I think that was a less difficult market. it seems to me when I try to open up my stops and hold things longer I take it on the chin and watch as it reverses from gains to become a loss. BUT then again the bulk of my holdings are exited to early. NANO I took 2/3 of the visual move, BIOS i took 1/2 , TGI I took 1/3 the latest short term swing and so on and so forth. However FAST I took most of the swing in two bites (which cut potential proffits down) BUT it gapped down 3 points today so that wasn't too early an exit, sold yesterday.
My nemissis is the negative earnings suprise. I can find them all in any trend condition. So far now that i've calmed my temper from watching a months of hard work go away in two days when I considered exiting everything three days ago and I let an outside invluence convince me that we would see more momentum in this market, it's not that bad. The killer was DSL yesterday I had a nice good holding there. OUCH! the rest was a death of 1000 cuts. I got mad and exited everything... much of which is up today.
so my schedule is gong to change in the coming oneths and i ness a less active aproach during the day and i suspect that in general I can afford to not baby sit my trades. however that has saved me from some serious drawdowns it's also , and probably more frequently helped me cut my losses short.
My classic delima is such IPSH I have 800 shrs of... it was up enough this morning to bring in $100 (which isn't allot but it's a cheap stock and slow mover) and is now backing off that figure significantly. If it closed here that will create a tail to the up side which is fairly negative on the short term, buti'm putting in a bt that this is a bottom here.. for a slightly longer tem so i'm gonna stick with it.
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Registered User
Joined: 6/8/2006
Posts: 58
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I once read an interview with a very successful multi millionaire lady trader. She said she takes small gains consistently. That many of her trades had only $200 -300 profits.
The other thing is I think we have to think for oursleves. I don't know about you but I'm always looking for someone to confirm my analysis and then when I don't get it I go with other people's assessment and it back fires. I have had this lesson several times over. I hope that tonight will be my last time to learn this and I will go with my own analysis and gut feelings in future.
Good luck anyway. It was a wild ride tonight (my time) day (your time).
Cheers
Muniyba
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Registered User
Joined: 3/1/2005
Posts: 34
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When I have made the decision to buy an option, I use the Good till cancelled limit order to make my entries. I set my buy target at the low end of the noise in the trading for the recent Then I can relax and let Mr market let me in. I also use limit orders for the sell side. I have given the essence of my strategy on another post,
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