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>>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.
Hmmm...since the CBOE trades equity options I am not sure how useful
that piece of advise would be in regards to trading futures options.
Just a thought.
You might want to study the volume/OI statistics and look at some
EOD/Intraday charts for the options/markets you are considering. This
should give you a good idea of what markets are liquid enough to day
trade.
If you go ahead with it, I recommend that you study the option pricing
formulas. Since you are day trading, time decay shouldn't be too much of
an issue but you will need to understand and evaluate the delta of an
option (how it moves in relation to the underlying). Also, arbitrage
trades will have a huge effect on option markets so in that sense, you
will need to know the other attributes of an option (implied volatility,
etc.) to make an educated guess at what the arbs will be doing.
Finally, transaction costs are much higher for option trades (depending
on the firm used of course) which could make day trading options (which
by definition will require a large number of trades) very expensive and
could indeed put your whole trading into the red even if you are correct
in your market trades.
--
Regards,
Tim Ryan
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