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Am looking to expand my trading into USA share options.
Only trading the most liquid options so probably only covering 10 shares or so.
I was wondering what my options are (no pun intended) as I will mainly be trading using weekly/monthly charts so positions will be open from anything to a few weeks to a few months max.
I know there are longer term options but these are .ore suitable for holding for 9 months + which is too long for my strategy.
Is this possible to do and make a profit-will I have to keep rolling over weekly options or will I get totally nailed with time decay if longer options are available?
Any help/advice/opinion will be greatly appreciated.
Keab
Can you help answer these questions from other members on NexusFi?
As I understand it, you want to trade "Long or short covered calls or puts" on your existing stock portfolio. If I have misunderstood this, please correct it and explain in more detail which option strategy you actually want to trade.
Regardless to this specific point: Enter the following search query into your search engine and it will show you what kind of options are available in which stock market:
Now you get all the different Option Chains in this share segment with all available TF, even from the different Exchanges. This will answer or gives at least some more infos to this part of your question.
Trading: Equities, index options and futures/futures options
Posts: 190 since Apr 2010
Thanks Given: 66
Thanks Received: 198
The longer the time to expiration the less the option will respond to moves in the underlying (Gamma). That is to say the Delta will increase slower than a shorter dated option as it goes in the money. The longer the time to expiration the more the option will respond to changes in volatility (Vega). Premium decay (Theta) will also be lower with long dated options. There is always a trade off when choosing different strikes and expirations depending on what your goals and risk tolerance are.
Thank you for your detailed reply.
My plan is to buy out of the money options that are cheap in the expectstion that price in the underlying will reverse and increase the price of the options.
I'm pretty good at trading long term (monthly/weekly/daily levels)- do you have any advice on this strategy, or can point me to any sources on the matter?
I suppose the key thing here is of I have the choice of buying a 140 out of the money option or a 142 out of the money option, what is the best choice of the two in terms of all the Greeks which will maximise my returns? I'm aware that things can become VERY complicated very quickly and can veer away from this very basic strategy.
Trading: Equities, index options and futures/futures options
Posts: 190 since Apr 2010
Thanks Given: 66
Thanks Received: 198
The thing to understand about buying options is that the price discounts a certain amount of movement in the underlying. The higher the Implied Volatility of the option the more time premium there is and that means you need a bigger move to make money especially when buying longer dated options which have lots of time for price to decay. This is why professionals like to sell time premium. Buying out of the money options works well when you have a big move in the underlying that exceeds the Expected Move that is priced into the option but the Market Makers do a pretty good job of pricing options for them to make money with normal amounts of market movement.
