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.

 

[stellar0645]

hi @acom, the best set up for me on a long is where price is above the MDI line, breaking through or . . . . .

Thanks to @agorena and everyone for the great insights. Like XKamiX, I have been using a homebrew collection of indicators with mostly poor results. Despite intensive scheming and second by second assessment of the indicators, I think that flipping a coin might be more productive.

So I'm going to study the suggestions here and look at the videos, etc.

I trade exclusively the SPX options but it seems that most people here are focused on SPY. Are there particular advantages or disadvantages to using either one? I believe that my friend and I are using SPX options because they are cash settled.

Any suggestions would be greatly appreciated, thanks very much…

 

[zee2881]

Thanks to @agorena and everyone for the great insights. Like XKamiX, I have been using a homebrew collection of indicators with mostly poor results. Despite intensive scheming and second by second assessment of the indicators, I think that flipping a coin might be more productive.

So I'm going to study the suggestions here and look at the videos, etc.

I trade exclusively the SPX options but it seems that most people here are focused on SPY. Are there particular advantages or disadvantages to using either one? I believe that my friend and I are using SPX options because they are cash settled.

Any suggestions would be greatly appreciated, thanks very much…

In answer to your question about SPY vs. SPX options, I prefer SPY over SPX due to the fact that the spreads are pretty wide on SPX while SPY spreads are in the 1-2 cents range. With SPX, if your entry is bad you'll be upside down bigger and quicker if you're not managing your risk well. Also, the volume is much greater with SPY over SPX so you'll typically get better fills.

Finally, here's my simple one-minute scalping set-up using MACD, VWAP and Heiken Ashi only. Here are a few ways to use this set-up:
1) Trade the MACD cross-over when it agrees with the Heiken Ashi candle color (lots of whipsaws potentially)
2) Go long only when price is above VWAP and go short only when price is under VWAP (higher probability)

For exits, I'll bail when MACD turns in the other direction or I meet my profit target but I always trail stop my position as well. This is up to you to figure out as everyone has a different process.

Here's my chart set-up:
https://tos.mx/1zMe93w

Good luck whatever you decide and feel free to let me know if you have any questions.

 

[Cybersloth]

Thanks to @agorena and everyone for the great insights. Like XKamiX, I have been using a homebrew collection of indicators with mostly poor results. Despite intensive scheming and second by second assessment of the indicators, I think that flipping a coin might be more productive.

So I'm going to study the suggestions here and look at the videos, etc.

I trade exclusively the SPX options but it seems that most people here are focused on SPY. Are there particular advantages or disadvantages to using either one? I believe that my friend and I are using SPX options because they are cash settled.

Any suggestions would be greatly appreciated, thanks very much…

Unless you're trading a tax-differed account, SPX options have the distinct and overwhelming advantage over SPY options of falling into the category of 1256 in the US tax code, which means the contracts are taxed 60% as long-term gains and 40% as short-term gains whether you hold the contracts for 5 seconds or 1 year or longer. E-mini futures on the S&P 500 (/es) have the same treatment, incidentally. Additionally, as SPX is a European-styled, cash settled contract, the option may not be abruptly exercised against you until expiry, which is not the case with the American-styled SPY contracts. Once again, the tax-treatment of SPX options constitutes a substantial advantage.

 

[stellar0645]

In answer to your question about SPY vs. SPX options, I prefer SPY over SPX due to the fact that the spreads are pretty wide on SPX while SPY spreads are in the 1-2 cents range. With SPX, if your entry is bad you'll be upside down bigger and quicker if you're not managing your risk well. Also, the volume is much greater with SPY over SPX so you'll typically get better fills.

Finally, here's my simple one-minute scalping set-up using MACD, VWAP and Heiken Ashi only. Here are a few ways to use this set-up:
1) Trade the MACD cross-over when it agrees with the Heiken Ashi candle color (lots of whipsaws potentially)
2) Go long only when price is above VWAP and go short only when price is under VWAP (higher probability)

For exits, I'll bail when MACD turns in the other direction or I meet my profit target but I always trail stop my position as well. This is up to you to figure out as everyone has a different process.

Here's my chart set-up:
https://tos.mx/1zMe93w

Good luck whatever you decide and feel free to let me know if you have any questions.

zee2881: Thanks very much for your reply. I hadn't realized those differences between the two so will do some more testing of the SPY alternative.
I will also look at your 1 min. scalping set up. Certainly getting some new and helpful perspectives here, more questions probably coming!
Thanks again…

Unless you're trading a tax-differed account, SPX options have the distinct and overwhelming advantage over SPY options of falling into the category of 1256 in the US tax code, which means the contracts are taxed 60% as long-term gains and 40% as short-term gains whether you hold the contracts for 5 seconds or 1 year or longer. E-mini futures on the S&P 500 (/es) have the same treatment, incidentally. Additionally, as SPX is a European-styled, cash settled contract, the option may not be abruptly exercised against you until expiry, which is not the case with the American-styled SPY contracts. Once again, the tax-treatment of SPX options constitutes a substantial advantage.

Thanks for those observations. However, I'm in a Canadian tax regime here so it's all capital gains but only 50% is taxable as income.
We do have Tax-Free Savings Accounts which can accumulate gains tax-free but they cannot be accessed by TOS. Of course, I could use TOS for the signaling and do the trades in WebBroker but timeliness might be an issue for day trading.
I think that as long as the SPX options are purchased, then there is no risk of them being exercised by a third-party prior to expiry. Would that be correct?
Thanks again…

 

[Cybersloth]

Thanks for those observations. However, I'm in a Canadian tax regime here so it's all capital gains but only 50% is taxable as income.
We do have Tax-Free Savings Accounts which can accumulate gains tax-free but they cannot be accessed by TOS. Of course, I could use TOS for the signaling and do the trades in WebBroker but timeliness might be an issue for day trading.
I think that as long as the SPX options are purchased, then there is no risk of them being exercised by a third-party prior to expiry. Would that be correct?
Thanks again…

To clarify, with European-style options (e.g. SPX) neither the buyer nor seller can exercise or receive assignment prior to expiry whereas with American-style options, either can transpire anytime up to the time of expiry. European-style options are settled in cash rather than the underlying security. Yes, assignment risk pertains only to sold (i.e. shorted) option contracts regardless of whether the contracts are American or European.

 

[XKamiX]

I just wanted to say again thank you all for the help and advice, and it's been helping a lot, and I've been using higher TFs, and It's really been helping cut out all the noise the market makes and using price action and volume helps so much see things much easier

 

[lkwebb]

THERE is so many indicators etc for charting. Since im a new trader and I am trying to learn as much as can before I start tradeing. My question is what are the most logical choice for somebody that is fairly new.
I really like the vpoc it makes things fairly simple.
I'm sure everyone wants the better indicators to help with buying and selling.
Vwap cloud and many more.
I thank yall for any suggestions

I will be mostly doing option tradeing

 

[Jayslife]

hi everyone my name is jay iam new here so far i love what i see . i have a ? what indicators are best to use for options ?

 

[Gellidus]

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

Hi Chemmy,

Do you draw the supply and demand zone by hand or its by pivot?

 

[HODL-Lay-HE-hoo!]

Does anyone have an indicator/study that works best for them when it comes to Options Trading ?
Thanks.

You are in luck!... this happens to be THE end all be all of indicators for desktop and mobile... (ACCORDING TO MYSELF so take this with a grain of salt) it is from the Confirmation Candles thread (the main study is C3_Max_Spark http://tos.mx/H7Xrhwx

 

[HODL-Lay-HE-hoo!]

Unless you're trading a tax-differed account, SPX options have the distinct and overwhelming advantage over SPY options of falling into the category of 1256 in the US tax code, which means the contracts are taxed 60% as long-term gains and 40% as short-term gains whether you hold the contracts for 5 seconds or 1 year or longer. E-mini futures on the S&P 500 (/es) have the same treatment, incidentally. Additionally, as SPX is a European-styled, cash settled contract, the option may not be abruptly exercised against you until expiry, which is not the case with the American-styled SPY contracts. Once again, the tax-treatment of SPX options constitutes a substantial advantage.

hmmm interesting never knew that

 

[HODL-Lay-HE-hoo!]

hi everyone my name is jay iam new here so far i love what i see . i have a ? what indicators are best to use for options ?

Here you go buddy... https://usethinkscript.com/threads/confirmation-candles-indicator-for-thinkorswim.6316/post-117629 pure gold from a man amongst men @Christopher84 (plenty of screenshot explanations and whatnot in the comments)

 

[Bpositive]

In answer to your question about SPY vs. SPX options, I prefer SPY over SPX due to the fact that the spreads are pretty wide on SPX while SPY spreads are in the 1-2 cents range. With SPX, if your entry is bad you'll be upside down bigger and quicker if you're not managing your risk well. Also, the volume is much greater with SPY over SPX so you'll typically get better fills.

Finally, here's my simple one-minute scalping set-up using MACD, VWAP and Heiken Ashi only. Here are a few ways to use this set-up:
1) Trade the MACD cross-over when it agrees with the Heiken Ashi candle color (lots of whipsaws potentially)
2) Go long only when price is above VWAP and go short only when price is under VWAP (higher probability)

For exits, I'll bail when MACD turns in the other direction or I meet my profit target but I always trail stop my position as well. This is up to you to figure out as everyone has a different process.

Here's my chart set-up:
https://tos.mx/1zMe93w

Good luck whatever you decide and feel free to let me know if you have any questions.

Zee2881 Please let me know if you are still using this template and if this suffers from many whipsaws. Do you use it with other futures too?.. Thanks

 

[zee2881]

Zee2881 Please let me know if you are still using this template and if this suffers from many whipsaws. Do you use it with other futures too?.. Thanks

I've since stopped using this set-up, MACD just isn't reliable for me. I have a friend that taught me how to use volume profile recently and my success has been outstanding.

 

[lolreconlol]

I've since stopped using this set-up, MACD just isn't reliable for me. I have a friend that taught me how to use volume profile recently and my success has been outstanding.

Can you share your volume profile strategy?

 

[khpro59]

Gentlemen:

Do not try and scalp options. Take it from someone who has been trading over 30 years. It does not work. Normal market fluctuations will take you out at a loss most of the time and this strategy is not sustainable. If you want to trade options, use any system you want, but work off of a 1 or 2 hour chart. Those signals are much more reliable than scalping on a 5 or 10 minute chart. Try it and you will see it works better. Trade liquid stocks with decent volume and open interest and you will succeed.

Good luck.

my 8 year career will tell you/him otherwise ... its extremely difficult and absolutely no time for emotion (like most trading), but directional option scalping isnt as difficult as you make it seem. Join the dark side!

 

[Thewealthiest]

1. What are some of the best addon tools for options trading?

2. Is there a script for profit loss percentage? Like the calculator?

https://www.optionsprofitcalculator.com/

3. I feel that order flow is sometimes useful to estimate future moves. Who supplies the best order flow data?

 

[sreeram]

Hi,

I am new to useThinkscript. What are some good indicators, setups to trade options?

thanks,

Sreeram

 

[sreeram]

I am thinking of using 15 min candle chart with MCAD indicator to trade options. Does anyone has luck with 15 min candle setup?

 

[pmohanty1987]

@lostcoastsurf I am not aware of any way to extrapolate and transpose the EntryPrice() of an Option onto the underlying Stocks chart... We don't have access to portfolio trade data... The correlation between the underlying and option is fairly complex and you don't buy the option at a specific underlying price, the transaction takes place totally separately... I run charts for both the stock and the option during trades, along with Active Trader for the option...

View attachment 10608

will you b able to share your TOS scalping workspace ??