Best Option Strategies For ThinkOrSwim

[lostcoastsurf]

I'm brand new to options, wanted to start learning how to day trade options on a smaller time frames. Would there be a way to post a label on the chart showing the break even line or price for your current open options position? How about the profit/loss? Thanks if it's obvious, or even if it's not, did a search and couldn't come up with anything.

 

[DB01]

Steer your position towards a targeted delta/gamma neutral position and adjust to generate income against it.

Positive gamma is long calls and log puts. Negative gamma is short calls and short puts. Positive Delta is long calls and short puts and negative delta is short calls and long puts.

So suppose you are sitting at 100 long shares of XYZ stock. I want to generate income against because its not doing anything....I would sell a .45 delta call option against it for premium which would offset my long shares and put cash in pocket then I would hedge the downside risk by buying 2 long puts at say .45 Delta at a long expiration date and sell 2 short puts at a closer expiration date to generate income on the put side. It should equate to more or less a slightly positive position with both downside risk covered and income producing.

Now instead of using stock shares you can use stock replacement by purchasing 2 long dated calls at .5 Delta and then you can sell 2 near term calls to generate more income instead of holding shares.

I am almost completely using stock replacement and don't even use indicators because all of the information about the future expected price is encoded within the options pricing.

Easy Peezy.

What sort of monthly profit percentages are you seeing using this technique?

Thank you for sharing your process.

 

[HODL-Lay-HE-hoo!]

Two options trading strategies

https://usethinkscript.com/threads/...y-w-studies-for-thinkorswim.10798/post-104741

https://usethinkscript.com/threads/...-highs-lows-for-thinkorswim.10866/post-105371

When and what options to buy is the easy part… the discipline to stop out or to take profit is the hard part. Which is why they say having specific rules is the way to go.

 

[XKamiX]

I seriously need help finding a strategy, I keep on losing and not knowing what to do or what I should change I've used EMA crossover and even with hull moving data and Macd and DMI or MFI and i just cant seem to get it down, and I don't know what TF I should trade on if i should go to higher TF's or what and if I should use regular candles or Heikin Ashi Chart I've had good trade both on 1 min and 5 min but honestly probably just luck, but I'm not here for luck I'm trying to find consistency and success and I ask for anyone's help or just to give me a guide or to send me into the right direction on what I should do and if anyone wants I can post my charts of all the strategies I've tried a strategy that consist of me buying puts or calls on the cross over the fast ema is 8 the slow one is 21, and they use hull data not exponential and I look at the DMI to see if what side is stronger and use MFI to see if it's selling off or if people are buying I've tried to use it on 5 min and 1 min to both just me not making as much as I lose I have a 10% stop loss always and 15% Take Profit orders i usually try to move up my stop loss up while I'm up but I always get kicked out fast and I could have been in longer and made more

I have tried the macd cross over as a signal to buy puts or calls and RSI to see if I should get in right now or not, but I just can't get it down I always get in not good times or if I get filled its bad, and then I get kicked out by my stop loss and then just don't make profits and just want to know if I should be using a higher time frame or other indicator's injunction with these or try swing trading and I must succeed to provide for those who care about, so I've the determination so if anyone could help guide me to the right path to go from here would be much appreciated

 

[w4bmastah]

Hi there. The first problem I see is that your charts do not contain any support/resistance levels, so you do not have an anchor about where the price is expected to go. You need to have these to help you establish higher probability setups.

Also, the problem with using indicators in general, is that they give you a false sense of confidence. They are lagging behind the real price action and give you entires and exists too late, and sometimes in conflict with other time frames. The only truly useful indicator is the price itself, along with the volume to confirm if whatever breakout is happening has the buyers/sellers behind it, and where the breakout is happening in relation to the higher timeframe support/resistance level (however you calculate that: fibonnaci, standard support lines, vwap, vwap deviations, high volume areas/low volume areas). You will see breakouts happening, but without knowing how to read volume, you will blindly trust the indicator make it easy to go into a move that fails.

Indicators should really only be used as a suggested warning signal, but the price action is king. It is entirely possible to trade with no indicators by simply learning how to read price action and seeing how it reacts to trend lines, with no other indicators. I would recommend learning about market structure, how to correctly draw support and resistance levels, channels, triangles, regression lines, and fibonnaci retracement levels - and then how to adjust your stop loss according to the market structure (below recent high/low swing) rather than a percentage based stop loss which is arbitrary and likely to be taken out). If you're not familiar with market structure and drawing to market structure, this is a very good introductory video that introduces core concepts that you will need to practice before designing any kind of trading system, or selecting 1, 2, or 3 favorite indicators to serve as supporting roles in your decisions:

https://www.facebook.com/video.php?v=571757629897521

It doesn't matter if you trade Heiken Ashi or regular candles - it is a matter of preference, and still does not give an edge unless you are tethered to a foundation about market structure. You will become very confused if you use too many indicators on your charts (I have gone through this myself many times hoping for perfect combination of indicators), and become paralyzed about what is the appropriate action. The vast majority of indicators will never give you confidence that the volume is there to support the action. Research how to read the volume to support whether you should get into or out of a trade. Volume is what predicts if a price has the support at a given level, or if the buyer/seller support does not warrant that price being where it is. You can add volume based indicators, but these are also not always as helpful as learning how to read volume bars, volume profiles, and volume changes at VWAP or VWAP deviation bands. Price travels between high volume and low volume areas and constantly tries to find where is best price. Knowing where those high volume areas used to be is where you will get support and demand zones, and thus you can more easily predict where the price is more likely to go.

The additional problem with indicators is that some work best when the market is trending, but give you many false signals when it is not (MACD for example is very bad in a sideways market). Other indicators tend to work better in the sideways market about the most likely time that a breakout might happen. Because calculations give different results depending on arbitrary settings that someone from some channel or post will tell you, they will only be right a certain percentage of the time in a certain context, in a certain market condition - but conditions change, and you have to change with it. You can buy a book like Technical Analysis A-Z and read about all the magic indicators, but even when you understand how all of them work, your head will spin and you still with not know which one to trust. They all work some of the time, and can only point to the most likely outcomes, but provide no certainty.

1. Always trade on the BEST timeframe that aligns with the BEST market structure and trade setup and not just on the time frame you want to trade on - you may not get a good setup on your timeframe, so you either have to be patient or switch to a timeframe that has a good setup. This means sometimes trading on a 1m, sometimes on a 5m, 15m, or 30m chart, or higher. 1 minute charts are no noisy that it is going to be very difficult to trade on. Always verify your trade ideas on higher time frame charts to make sure you are on correct side of trade regardless of what your indicators tell you.

2. It is always better to have much higher timeframes than 1m, 5m ,15m to confirm the big picture of what is most likely to happen. Without using some kind of support or resistance to back up your theory about where SPY will go, you will try to surf hurricane and lose all your money (I blew up a few accounts this way).

3. Do not get caught in greed of "Oh, I could have made more". You never know where the price will go, and there will be no shortage of opportunity, set your risk to reward ratio so that you only need to be right a minimum of 50% of the time, and still make money by using 2:1 risk reward ratio.

There is a lot to learn; but with persistence, and trading a strategy backed by foundation in price action and volume, in a test account you will be able to start trusting your decisions more and get more consistent income. Good luck

 

[XKamiX]

Hi there. The first problem I see is that your charts do not contain any support/resistance levels, so you do not have an anchor about where the price is expected to go. You need to have these to help you establish higher probability setups.

Also, the problem with using indicators in general, is that they give you a false sense of confidence. They are lagging behind the real price action and give you entires and exists too late, and sometimes in conflict with other time frames. The only truly useful indicator is the price itself, along with the volume to confirm if whatever breakout is happening has the buyers/sellers behind it, and where the breakout is happening in relation to the higher timeframe support/resistance level (however you calculate that: fibonnaci, standard support lines, vwap, vwap deviations, high volume areas/low volume areas). You will see breakouts happening, but without knowing how to read volume, you will blindly trust the indicator make it easy to go into a move that fails.

Indicators should really only be used as a suggested warning signal, but the price action is king. It is entirely possible to trade with no indicators by simply learning how to read price action and seeing how it reacts to trend lines, with no other indicators. I would recommend learning about market structure, how to correctly draw support and resistance levels, channels, triangles, regression lines, and fibonnaci retracement levels - and then how to adjust your stop loss according to the market structure (below recent high/low swing) rather than a percentage based stop loss which is arbitrary and likely to be taken out). If you're not familiar with market structure and drawing to market structure, this is a very good introductory video that introduces core concepts that you will need to practice before designing any kind of trading system, or selecting 1, 2, or 3 favorite indicators to serve as supporting roles in your decisions:

https://www.facebook.com/video.php?v=571757629897521

It doesn't matter if you trade Heiken Ashi or regular candles - it is a matter of preference, and still does not give an edge unless you are tethered to a foundation about market structure. You will become very confused if you use too many indicators on your charts (I have gone through this myself many times hoping for perfect combination of indicators), and become paralyzed about what is the appropriate action. The vast majority of indicators will never give you confidence that the volume is there to support the action. Research how to read the volume to support whether you should get into or out of a trade. Volume is what predicts if a price has the support at a given level, or if the buyer/seller support does not warrant that price being where it is. You can add volume based indicators, but these are also not always as helpful as learning how to read volume bars, volume profiles, and volume changes at VWAP or VWAP deviation bands. Price travels between high volume and low volume areas and constantly tries to find where is best price. Knowing where those high volume areas used to be is where you will get support and demand zones, and thus you can more easily predict where the price is more likely to go.

The additional problem with indicators is that some work best when the market is trending, but give you many false signals when it is not (MACD for example is very bad in a sideways market). Other indicators tend to work better in the sideways market about the most likely time that a breakout might happen. Because calculations give different results depending on arbitrary settings that someone from some channel or post will tell you, they will only be right a certain percentage of the time in a certain context, in a certain market condition - but conditions change, and you have to change with it. You can buy a book like Technical Analysis A-Z and read about all the magic indicators, but even when you understand how all of them work, your head will spin and you still with not know which one to trust. They all work some of the time, and can only point to the most likely outcomes, but provide no certainty.

1. Always trade on the BEST timeframe that aligns with the BEST market structure and trade setup and not just on the time frame you want to trade on - you may not get a good setup on your timeframe, so you either have to be patient or switch to a timeframe that has a good setup. This means sometimes trading on a 1m, sometimes on a 5m, 15m, or 30m chart, or higher. 1 minute charts are no noisy that it is going to be very difficult to trade on. Always verify your trade ideas on higher time frame charts to make sure you are on correct side of trade regardless of what your indicators tell you.

2. It is always better to have much higher timeframes than 1m, 5m ,15m to confirm the big picture of what is most likely to happen. Without using some kind of support or resistance to back up your theory about where SPY will go, you will try to surf hurricane and lose all your money (I blew up a few accounts this way).

3. Do not get caught in greed of "Oh, I could have made more". You never know where the price will go, and there will be no shortage of opportunity, set your risk to reward ratio so that you only need to be right a minimum of 50% of the time, and still make money by using 2:1 risk reward ratio.

There is a lot to learn; but with persistence, and trading a strategy backed by foundation in price action and volume, in a test account you will be able to start trusting your decisions more and get more consistent income. Good luck

Thank you for so much help and do you have any recommendations for learning price action and also on this form there is auto fib would that be good to use as support and resistance points ? And also would this be a good time frames to use 5, 30 , 4 hr charts to look at for a potential trade yeah I need to get better at reading price action I refuse to give up ill keep on trying

 

[csricksdds]

I trade SPY every day using my AsGoodAsItGets and AsGoodTrendColorCandles_MTFS and rarely have a losing day. I use the 1 min as a heads up and the 5 min for trading. Because of repaints I exit if a bubble disappears....

 

[w4bmastah]

Thank you for so much help and do you have any recommendations for learning price action and also on this form there is auto fib would that be good to use as support and resistance points ? And also would this be a good time frames to use 5, 30 , 4 hr charts to look at for a potential trade yeah I need to get better at reading price action I refuse to give up ill keep on trying

Lots of good video courses on price action. These would be two good starting points:

Auto fib is not reliable, because what you really have to do is build confluence between multiple fib retracements which have to be manually drawn using drawing tools and most significant highs and lows to build the most likely places of reveral. There's lots of training on how to draw Fib levels, and it is a bit of an art. Here is a good starter video:

Fibonacci levels are also not always reliable either, so these are again suggestions of where pricing is statistically more likely to reverse, but you still have to pay attention to what happens with price action and volume at these levels.

 

[XKamiX]

I trade SPY every day using my AsGoodAsItGets and AsGoodTrendColorCandles_MTFS and rarely have a losing day. I use the 1 min as a heads up and the 5 min for trading. Because of repaints I exit if a bubble disappears....

Your AsGoodAsItGets indicator how do you use it ? And do you trade options and do you have a chart set up you can share a link ?

 

[XKamiX]

Lots of good video courses on price action. These would be two good starting points:

Auto fib is not reliable, because what you really have to do is build confluence between multiple fib retracements which have to be manually drawn using drawing tools and most significant highs and lows to build the most likely places of reveral. There's lots of training on how to draw Fib levels, and it is a bit of an art. Here is a good starter video:

Fibonacci levels are also not always reliable either, so these are again suggestions of where pricing is statistically more likely to reverse, but you still have to pay attention to what happens with price action and volume at these levels.

Ok yeah I figured that wasn’t a truly reliable strategy I’ve tried it and it was pretty accurate but just make the chart hard to read at time and just don’t like it on mine and thank you again so much for all this I’m trying to get on the right path to my trading and this will help a lot

 

[MerryDay]

Your AsGoodAsItGets indicator how do you use it ? And do you trade options and do you have a chart set up you can share a link ?

https://usethinkscript.com/threads/asgoodasitgets-for-thinkorswim.11672/

How to search for answers to any additional questions:
https://usethinkscript.com/threads/search-the-forum.12626/

 

[w4bmastah]

Ok yeah I figured that wasn’t a truly reliable strategy I’ve tried it and it was pretty accurate but just make the chart hard to read at time and just don’t like it on mine and thank you again so much for all this I’m trying to get on the right path to my trading and this will help a lot

The great thing about drawing fib levels, is that you don't have to keep everything on your screen. You can hold down Ctrl and click on the fib lines you don't need after you use the retracement tool. This leaves just the 1, 2, or 3 lines that may want to keep on your chart. This prevents your charts from getting messy with multiple extensions. You can also enter the settings and pick different defaults to only give you the most common retracements. I don't like messy charts either

 

[agorena123]

Lots of good replies here but try this set up on SPY and SPY options. I run two charts - top chart:
1. 1600 tick chart with HA candles
Search these indicators here and apply with stock settings:
1. MAMA
2. MAMA MDI Combo Upper
3. Chris Enhanced Volume (volume overlapped on chart)
4 Cumulative Delta Volume (no bands, no background color)

Bottom chart is the options chart, same indicator set up as the SPY chart but on 40 or 80 tick chart - see which you prefer. I use Active Trader on the right side of the chart for orders.

Create a watchlist with SPY symbol only. Create an options scan with your preferred DTE and price limits and run the scan on the SPY only watchlist. I run 1-3DTE scan, volume greater than 1000, and price within .40 and $2. I create two scans - one for puts and one for calls.

On the watchlist side of the screen add two option scan watchlists and add Volume. Mine shows the option, last price, and volume only. Sort by Volume. Link each watchlist to the bottom chart so you can easily chart between calls and puts.

When you get the charts set up you should see trade opportunities when the upper indicators align and cumulative delta volume is consistent with trend direction. The option charts tends to mirror the SPY chart fairly closely. This setup works pretty good for me on trending days, and wide ranging days. Nothing works for SPY on flat ranging days. Also, as you probably know SPY options (all options) can be unforgiving so I get out fast if the trade doesn't work out and take profits early, too early sometimes sadly. Hope this helps and good luck!

here is the link to my chart set up. Some minor changes - changed from 1600t to 800t on SPY and 20t or 40t on options. Removed Chris Enhanced Volume and added VWAP indicator to SPY.

http://tos.mx/lv621Ly

 

[XKamiX]

Lots of good replies here but try this set up on SPY and SPY options. I run two charts - top chart:
1. 1600 tick chart with HA candles
Search these indicators here and apply with stock settings:
1. MAMA
2. MAMA MDI Combo Upper
3. Chris Enhanced Volume (volume overlapped on chart)
4 Cumulative Delta Volume (no bands, no background color)

Bottom chart is the options chart, same indicator set up as the SPY chart but on 40 or 80 tick chart - see which you prefer. I use Active Trader on the right side of the chart for orders.

Create a watchlist with SPY symbol only. Create an options scan with your preferred DTE and price limits and run the scan on the SPY only watchlist. I run 1-3DTE scan, volume greater than 1000, and price within .40 and $2. I create two scans - one for puts and one for calls.

On the watchlist side of the screen add two option scan watchlists and add Volume. Mine shows the option, last price, and volume only. Sort by Volume. Link each watchlist to the bottom chart so you can easily chart between calls and puts.

When you get the charts set up you should see trade opportunities when the upper indicators align and cumulative delta volume is consistent with trend direction. The option charts tends to mirror the SPY chart fairly closely. This setup works pretty good for me on trending days, and wide ranging days. Nothing works for SPY on flat ranging days. Also, as you probably know SPY options (all options) can be unforgiving so I get out fast if the trade doesn't work out and take profits early, too early sometimes sadly. Hope this helps and good luck!

Sounds interesting and do you think you could share your chart set up with indicators with a link here ?

 

[agorena123]

@XKamiX here is the link to my chart set up. Some minor changes - changed from 1600t to 800t on SPY and 20t or 40t on options. Removed Chris Enhanced Volume and added VWAP indicator to SPY.

http://tos.mx/lv621Ly

 

[acom]

@agorena123 Thanks for sharing your wonderful setup. Can you kindly explain further about your go to trading method. For example :- What are the things to look for in upper indicators and cumulative delta volume as enter point to buy call/put options?

 

[Chemmy]

A lot of good advice on this thread -- my 2 cents, although this is a forum centered around indicators, please be sure to understand the underlying price action that moves these indicators first. Price action is what moves every indicator you use, not the other way around, and getting too "indicator happy" too quickly will inevitably backfire in my opinion. @w4bmastah gave some good examples of his preference, whereas my preferred way to navigate price action is through supply and demand zones:

this was an example of zones working out well from around 2 weeks ago; you should be able to see multiple points of entry based on rejection of these zones. I saw that you said you don't like lots of stuff on your screen, but I just turn my transparency of the rectangles up high. If you'd like to learn, I learned a ton from Carmine Rosato on youtube: https://www.youtube.com/channel/UC9KV4pshtiKoQF_IanKiT_w

I also trade SPY/SPX exclusively, with a combination of the 3min and 15min time frames on my screen. I use the GoodAs indicator, the SwingArms indicator, the B4 breakouts and the QQE mod -- as well as some indicators I made myself, but the underlying foundation of my trading is based on price action, as should always be the case.

My chart: http://tos.mx/lbTNVAW there's probably more on it than you'd like but you're welcome to look at each study involved. The SwingArms are currently hidden on the chart, but it's a helpful study if you like ATR retracements

 

[acom]

@Chemmy Thanks for your comments. I totally agree and will definitely look at the price action video. Do you mind sharing your chart setup?

 

[Chemmy]

@Chemmy Thanks for your comments. I totally agree and will definitely look at the price action video. Do you mind sharing your chart setup?

Sure, here you go: http://tos.mx/lbTNVAW there's probably more on it than you'd like but you're welcome to look at each study involved. The SwingArms are currently hidden on the chart, but it's a helpful study if you like ATR retracements

 

[andre.muhammad]

I seriously need help finding a strategy, I keep on losing and not knowing what to do or what I should change I've used EMA crossover and even with hull moving data and Macd and DMI or MFI and i just cant seem to get it down, and I don't know what TF I should trade on if i should go to higher TF's or what and if I should use regular candles or Heikin Ashi Chart I've had good trade both on 1 min and 5 min but honestly probably just luck, but I'm not here for luck I'm trying to find consistency and success and I ask for anyone's help or just to give me a guide or to send me into the right direction on what I should do and if anyone wants I can post my charts of all the strategies I've tried a strategy that consist of me buying puts or calls on the cross over the fast ema is 8 the slow one is 21, and they use hull data not exponential and I look at the DMI to see if what side is stronger and use MFI to see if it's selling off or if people are buying I've tried to use it on 5 min and 1 min to both just me not making as much as I lose I have a 10% stop loss always and 15% Take Profit orders i usually try to move up my stop loss up while I'm up but I always get kicked out fast and I could have been in longer and made more

I have tried the macd cross over as a signal to buy puts or calls and RSI to see if I should get in right now or not, but I just can't get it down I always get in not good times or if I get filled its bad, and then I get kicked out by my stop loss and then just don't make profits and just want to know if I should be using a higher time frame or other indicator's injunction with these or try swing trading and I must succeed to provide for those who care about, so I've the determination so if anyone could help guide me to the right path to go from here would be much appreciated

Everyone and their uncle is using what you have listed to trade SPY. That is why it does not work, particularly on short time frames. Price does not respect any of those indicators. In fact, price is the single factor in learning to be a profitable trader, period, full stop! Want to win at trading SPY? Focus on price and volume.

 

[agorena123]

@agorena123 Thanks for sharing your wonderful setup. Can you kindly explain further about your go to trading method. For example :- What are the things to look for in upper indicators and cumulative delta volume as enter point to buy call/put options?

hi @acom, the best set up for me on a long is where price is above the MDI line, breaking through or bouncing off of vwap, and the MAMA signals buy - up arrow. I buy the highest volume option at or around the $1 mark. You will usually see the CDV printing green and if you do use the Chris Enhanced Volume, you will often see pure green volume bars at or slightly preceding the move. Look for the opposite for shorts. Keep a tight stop because there is no guarantee you will get follow through and if the move goes in your direction keep adjusting the stop on the option because they can lose value quickly. If you review the charts you'll see examples of this everyday on SPY, TSLA, NVDA, just about any liquid stock.

Next set up is on trend days where price is consistently above/below MDI and VWAP and trending. Wait for pullback to MDI line then signal from MAMA. Common pullback/flag approach, just using this indicators to help spot the time to initiate the trade. Hope this helps.