So I’ve recently been getting involved with level 2 options and have spent some time trying to get a good understanding of how they work. I think at this point I have graduated from “complete Neanderthal” to “useful idiot”, and have picked up on some key concepts that are essential to short term options trading.
Currently, my strategy is to siphon through stocks that have easy-to-read, high volume MACD charts that align with a 50d MA. (say, for example, if a stock has hit a peak price range in the 1M-3M chart, and the MACD starts to show a decline with a bearish confirmation on the 30 minute-1hour candles over the past month, it is a safe bet to assume the stock will drop until that demand crosses back over into bullish territory).
HOWEVER
My biggest gripe is trying to determine how long I should realistically hold these contracts so that my gains don’t erode before my prediction falls through. By applying this strategy and listening to my rules correctly, I was able to close a 60% gain on WMT in one trading day and a 30% closed gain on CHWY in about 4-5 trading days. I am trying to break an “experimental habit” where I instinctively get irrational when stocks don’t move fast enough or try to “get rich quick” by buying cheap very OOTM options and LOSING significantly more than I put in despite the asset moving in my desired direction.
So, if I were to be a good boy and bite the bullet buying close to/ITM options, when should I ultimately decide to sell instead of chasing my tail looking for a target price? I have been trying to build good habits and not let my options expire, so I have been buying them for 5-6 weeks out and only intend on keeping them for a few days to a week at most, then cycling to other applicable stocks when the tides change. How can I optimize the premium drain?
Can someone help me with timing my options plays based on daily decay?
byu/West_Chocolate3529 inoptions
Posted by West_Chocolate3529
2 Comments
What is wrong with the 5 to 6 weeks ?
Wow so you have Level 2, is that Level 2 at RH, or 2.1.0x at Webull, or Level 1 at Schwab. Confused me too. You could try Tasty they do not have levels, but a Check box.
Anyhow you seem way smarter than me since I have no clue what a Macd is , why you would use it or where you find it.
If you are looking for stuff that has been studied , and found useful , you can do what the rest of us do and try the videos over at Tastylive. Of course they are clueless about the market direction, and when they do pick they are wrong. Somehow they built two trading companies and sold them, and survived for 20 years as floor traders.