My Simple Strategy for Trading Options Intraday

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I rarely come across a trader that has not traded options. Options strategies come in many shapes and forms, but they are all intended to do one thing: Though I trading stock options strategies trade options, I have a totally different perspective on how and when to trade them. Because of the boom trading stock options strategies technology over the past 15 years, most of the trading done today is all electronic as opposed to picking up the phone and calling a broker or the pit.

And the economy of today is now global instead of being country specific. These factors have led the trading industry to look at the markets in a broader perspective where our markets will react with what happens in Europe or Asia. Not only this, but the markets are becoming a 24 hour market instead of just the standard 8: Since the markets are based on a 24 hour basis, we now can see how the world values our markets and get a better understanding on how our markets will perform based on how the world has traded.

I start my trading day early 5: Though equity options cannot be traded until after 8: Knowing this, by the time the U. Because of trading stock options strategies, I like to give the market one hour before entering into an options trade. This gives the U. Looking a Chart 1, you can see the direction of the world markets and how it affects the U. Chart 1 To trade options, I trading stock options strategies a basic strategy. If the market is going up, I buy calls or sell puts.

If the market is going down, I sell calls or buy puts. I prefer to be a seller of options rather than a buyer; however, there are some equities that move well enough in a day that buying the option pays better than selling the option and waiting for it to deteriorate.

Apple is a good example of this. Apple is one of the stocks that track very well with the E-mini for this reason I will use it as an example in this article. Though stocks have individual news and can move more at times or lessthey will generally trend with the E-mini. I then look at where the E-mini is trading based off of its open up or down and the overall direction of the market for the day, and see if Apple is trading in the same direction based off its open.

If so, I will buy an at-the-money, or first strike out-of-the-money, call if heading higher, or put if heading lower. I then give the market 30 minutes to see if the direction I traded is right. If so, I place a stop at half of the value I paid for the option, i. If the market has turned and I am not getting paid, I will get out of the position and look for another opportunity later.

If the trade is trading stock options strategies in my direction, then I will reevaluate it at 1: If the market reverses, then I get out. If the market continues in my direction, I stay with the trade and move my stop just to the other side of the open by about 10 cents and then look to re-evaluate the trade at 2: Chart 3 shows Trading stock options strategies and the E-mini on May trading stock options strategies, The E-mini started higher and continued the trend going into 9: The closest strike would have you buying the June call on Apple.

Chart 3 Chart 4 This is trading stock options strategies one example of a stock that can be traded throughout the day. Using the direction of the futures to get the trend shifts the odds in your favor of getting paid.

There are many stocks out there, just verify that they trend with the E-mini before using them in this manner. Tom Busby is founder of DTI and a pioneer in the trading industry as a world-recognized educator. He takes a complex subject, the global markets, and puts it into an easy-to-understand language for all levels of traders and investors. He is a member of the Chicago Mercantile Exchange Group and has been a professional securities trader and broker since At Connors Research, we are using it as an overlay to many of our best strategies to make them even better -- now you can, too.

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Option rookies are often eager to begin trading — too eager. Each is less risky than owning stock. Most involve limited risk. For investors not familiar with options lingo read our beginners options terms and intermediate options terms posts. Using stock you already own or buy new shares , you sell someone else a call option that grants the buyer the right to buy your stock at a specified price.

That limits profit potential. You collect a cash premium that is yours to keep, no matter what else happens. That cash reduces your cost. Thus, if the stock declines in price, you may incur a loss, but you are better off than if you simply owned the shares.

Cash-secured naked put writing. Sell a put option on a stock you want to own, choosing a strike price that represents the price you are willing to pay for stock. You collect a cash premium in return for accepting an obligation to buy stock by paying the strike price. A collar is a covered call position, with the addition of a put. The put acts as an insurance policy and limit losses to a minimal but adjustable amount. The purchase of one call option, and the sale of another.

Or the purchase of one put option, and the sale of another. Both options have the same expiration. Thus, the higher priced option is sold, and a less expensive, further out of the money option is bought. This strategy has a market bias call spread is bearish and put spread is bullish with limited profits and limited losses.

A position that consists of one call credit spread and one put credit spread. Again, gains and losses are limited. Diagonal or double diagonal spread. These are spreads in which the options have different strike prices and different expiration dates. The option bought expires later than the option sold 2. The option bought is further out of the money than the option sold. The likelihood of consistently making money when buying options is small, and I cannot recommend that strategy.

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