(I am not trading options yet, still have a lot to learn)
Hello, I understand that there is no “Golden Rule” to find the “best” stock to option trade both calls or puts. I understand iv/ivp along with all the greeks but when searching to buy an option what is your method.
I saw one post who mentioned buying call options to companies that had bad/mediocre earnings (which dipped the stock) and with good future guidance.
Also, how far away from expiration do you buy? And do you buy ITM or OTM?
I am new so please be merciful and please expand on your answers to different concepts I didn’t mention if you want.
Best way to find stocks to option trade.
byu/MarsDSD inoptions
Posted by MarsDSD
3 Comments
I trade the wheel which uses stocks you would not mind holding for a while if needed, and many find it easier to do than predict which may move up or down when buying options.
Buying requires predicting which way and by how much a stock might move, and by when, to profit. It is generally agreed that no one can reliably predict what the market or stocks will do in the future so buying often has low win rates.
Selling can win if the stock moves in the right way, not move at all, and even if it moves in the wrong direction by some amount. Because of this selling has a number of advantages over buying . . .
See this post about how to find stocks and it include a link to my wheel trading plan – [How to Find Stocks to Trade with the Wheel : r/Optionswheel (reddit.com)](https://www.reddit.com/r/Optionswheel/comments/19fmoyl/how_to_find_stocks_to_trade_with_the_wheel/)
Group I trade with finds them for me. Working day job makes it hard to find which ones to trade. They only swing so a lot safer.
Form an opinion on an asset. Decide whether you want to be long or short Theta. Then target the appropriate Greeks that support that opinion.
I think vol low for XYZ and will be higher in the future. Long vega.
I don’t sell options. Long theta.
I don’t have an opinion on direction. Delta neutral.
From there I’m just looking for contracts that maximize my risk adjusted return, that meet that criteria.