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This is not really a post about daytrading options,,,but since
I was considering posting about a way of initiating position with options I decided to post now.
If I think I find an end of 5th wave and try to pick a top or bottom,,,I thought it's better to take positions in options first,,,and preferably writing options,,,since I would have to take less risk.
Specially,,,writing options would benefit more.
Example,,,I notice the end of 5th wave of downtrend at 15.00 in XYZ U8.
I write as many puts as my risk management allows just next below striking price put,,say 14.50,,considering there's high enough volitility.
If I'm right about the wave evaluation,,,and trend reverses,,,I would be able to add with XYZ U8 futures long with my normal risk-take limit plus the credit I'm getting from writing options,,,or place a stop that will cover just with the credit from options.
If the retracement of 2nd wave breaches the end of 5th wave level,,,,then I'm wrong and buy back the options I sold,,,,and I'll be still be able to come ahead a little bit because of time decay of option value??
and if 2nd wave fails to break that level,,,,then I could add with futures contract.
This was the idea that I was playing with recently,,,and I was going to post to ask if there's any drawbacks in the idea. Any improving idea to add??? or this one's not good enough to consider further research??
*********** REPLY SEPARATOR ***********
On 7/31/98, at 10:04 PM, POMPATIS@xxxxxxx wrote:
>In a message dated 98-08-01 00:51:02 EDT, brente@xxxxxxxxxxxx writes:
>
><< In the recent past I considered day trading futures options even in liquid
> markets like Bonds or the S&P to be difficult or likely to be unprofitable.
> Since THE DOCTOR at the CBOE told me that he day trades options everyday
> for a living I’ve been thinking about it some more. Could any of you
> educate us about the advantages or disadvantages of day trading futures
> options in these or other markets? I’m hoping to get a little discussion
> about this. Advanced thanks.
>
> Brent >>
>
>Likewise, I too am developing an interest in learning more about the
>advantages of using options as a venue to trade the futures markets. I have
>heard that the risk per position is less than holding the underliying
>contract.
>
>Any informed input here would be appreciated, and would seem to make a new and
>interesting string of discussions.
>
>Sincerely,
>
>Pompatis
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