Best Option Strategies

[iebj3991]

Find the best options scalping strategy

 

[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.

 

[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