Guidance Swingtrading Options

[DrOculus]

Good people,

I am about 6 months into my options trading journey, so still finding my way. I've been basically trading based on trend, news, and basic technicals (support/resistance), and I'm looking to get a more refined and sophisticated system for making trades. I've been lurking on this site for a while and am drawn to the idea of using custom indicators to standardize my strategy, so I decided to pull the trigger on VIP membership. But I admit I had no idea how deep the rabbit hole went. So I'm looking for some suggestions for how to get started and what indicators are designed for my trading style.

I'm a swing trader with a full time job (not at a computer), so I definitely can't day trade or watch 5 minute charts throughout the day. I have time to trade around market open and I can briefly check in periodically throughout the day. I trade to supplement income using pretty basic option setups (credit/debit spreads, condors, calendars, etc).

Any advice or guidance would be appreciated. Thanks in advance for your time and effort!

TS

 

[andre.muhammad]

Good people,

I am about 6 months into my options trading journey, so still finding my way. I've been basically trading based on trend, news, and basic technicals (support/resistance), and I'm looking to get a more refined and sophisticated system for making trades. I've been lurking on this site for a while and am drawn to the idea of using custom indicators to standardize my strategy, so I decided to pull the trigger on VIP membership. But I admit I had no idea how deep the rabbit hole went. So I'm looking for some suggestions for how to get started and what indicators are designed for my trading style.

I'm a swing trader with a full time job (not at a computer), so I definitely can't day trade or watch 5 minute charts throughout the day. I have time to trade around market open and I can briefly check in periodically throughout the day. I trade to supplement income using pretty basic option setups (credit/debit spreads, condors, calendars, etc).

Any advice or guidance would be appreciated. Thanks in advance for your time and effort!

TS

I've never considered news when swing trading. For me, swing trades are based on particular setups, where I use verticals to play against the crowd. For example, while the crowd was excited about AAPL up here at 187, I was shorting. AAPL still remains a short for me though it closed at 183.38

 

[csricksdds]

Good people,

I am about 6 months into my options trading journey, so still finding my way. I've been basically trading based on trend, news, and basic technicals (support/resistance), and I'm looking to get a more refined and sophisticated system for making trades. I've been lurking on this site for a while and am drawn to the idea of using custom indicators to standardize my strategy, so I decided to pull the trigger on VIP membership. But I admit I had no idea how deep the rabbit hole went. So I'm looking for some suggestions for how to get started and what indicators are designed for my trading style.

I'm a swing trader with a full time job (not at a computer), so I definitely can't day trade or watch 5 minute charts throughout the day. I have time to trade around market open and I can briefly check in periodically throughout the day. I trade to supplement income using pretty basic option setups (credit/debit spreads, condors, calendars, etc).

Any advice or guidance would be appreciated. Thanks in advance for your time and effort!

TS

Thanks for your question. Trading principles remain essentially the same for day trading verses swing trading. The difference lies in how many days until expiration are you making trades for. I am essentially a day trader for SPY/QQQ/SPX using 0DTE which can be risky and will usually include 2-3 entries/exits per trading day.

For swing trading I use the same charting as for day trading, and am placing trades for Friday, or Friday Week Expirations. In either case I am looking for good entry/exit points but not expecting to hold until expiration. I like AMD, MSFT, GOOGL, etc. (stocks with at least 4+ ATR Volatility) for swing trades but am frequently in/out on the same day depending on movement of the stock.

I also always assume that any high or low achieved today could easily be the high/low for the stock going forward. I also pay close attention to the option chain to see where most of the OI (Open Interest = trades in place) action is taking place. I usually like to be a Delta or Two inside where most of the action is as I can usually assume (hope) to see movement within those areas. The reason I like to exit swing trades early is because Theta Decay is constantly working to your disadvantage (It's like buying an automobile which begins to depreciate in value as soon as you buy it).

The trading chart which I use for all trading is my AGAIG-BestTradingChartSetup (posted on this site) which also includes a pdf explaining the chart. Remember that there is no Holy Grail and we can only trade what we see, and what we can can best determine taking place. Always rely on multiple indicators to make decisions. Look closely at the clouded 8/20 EMAs which are on my chart, and look for crossovers (some traders only trade crossovers but beware that these can also turn out to only be kissing points). The 21 EMA is a frequent trend change point with the algorithmic computer traders and so I use the 20 as a heads up.

 

[DrOculus]

Thanks for your question. Trading principles remain essentially the same for day trading verses swing trading. The difference lies in how many days until expiration are you making trades for. I am essentially a day trader for SPY/QQQ/SPX using 0DTE which can be risky and will usually include 2-3 entries/exits per trading day.

For swing trading I use the same charting as for day trading, and am placing trades for Friday, or Friday Week Expirations. In either case I am looking for good entry/exit points but not expecting to hold until expiration. I like AMD, MSFT, GOOGL, etc. (stocks with at least 4+ ATR Volatility) for swing trades but am frequently in/out on the same day depending on movement of the stock.

I also always assume that any high or low achieved today could easily be the high/low for the stock going forward. I also pay close attention to the option chain to see where most of the OI (Open Interest = trades in place) action is taking place. I usually like to be a Delta or Two inside where most of the action is as I can usually assume (hope) to see movement within those areas. The reason I like to exit swing trades early is because Theta Decay is constantly working to your disadvantage (It's like buying an automobile which begins to depreciate in value as soon as you buy it).

The trading chart which I use for all trading is my AGAIG-BestTradingChartSetup (posted on this site) which also includes a pdf explaining the chart. Remember that there is no Holy Grail and we can only trade what we see, and what we can can best determine taking place. Always rely on multiple indicators to make decisions. Look closely at the clouded 8/20 EMAs which are on my chart, and look for crossovers (some traders only trade crossovers but beware that these can also turn out to only be kissing points). The 21 EMA is a frequent trend change point with the algorithmic computer traders and so I use the 20 as a heads up.

CS,

I went over your setup - thanks for the work! If I'm doing swing trades using expiration dates 30 - 60 days out (to minimize theta decay) but planning to get out earlier, maybe after 1-3 weeks, will this setup apply? Can it be used on a daily chart?

Thanks!

 

[csricksdds]

CS,

I went over your setup - thanks for the work! If I'm doing swing trades using expiration dates 30 - 60 days out (to minimize theta decay) but planning to get out earlier, maybe after 1-3 weeks, will this setup apply? Can it be used on a daily chart?

Thanks!

Yes...you can use it on a Day time frame and can see what the stock has done for the past several days. I'm currently looking at MSFT and can see an overall past down trend, then some chop, and now indicating an upward trend. If you trade 30 days out your Theta Decay will be approximately 1/30 decrease from your purchase price until expiration, and as with any trade, your goal is to outpace the Theta Decay.

I used to Swing Trade 30 - 60 days out as well, however I usually placed my trades as a spread. Theta decay is slower with a spread (however with a debit spread the profit will be slower as well). The closer Delta will decay a little faster than the delta further out. Let's say you place a $5 Debit Spread and pay $2.50 for the spread. The goal will be to sell it for more than paid. The maximum profit for this would be $2.50 ($5.00 less the $2.50 paid). My risk would be $2.50 and I would place a GTC to sell for $4.00 to $4.50 to try and capture profit without having to watch it as much.

On the other hand I would always prefer to place a Credit Spread. In this case I would immediately receive $2.50 per contract and would be looking to buy it back for $.50 to $1.00. In either case the risk would be the same $2.50 for a $5.00 spread (or whatever amount paid or the difference between risk minus amount received).

If Buying a Debit Spread I would buy ATM (At-the-money) or ITM (slightly In-the-money) debit spread looking for the stock to move in the opposite direction. If Selling a Credit Spread I would be looking for the stock to move in the opposite direction as well (away from the spread (however in this scenario you can still make money in a chop situation).

Hopefully I didn't give more of an answer than you were looking for?

In a Credit Spread the short position will be decaying at a faster rate than the long position hopefully making the profit potential show faster than would the debit spread.

 

[DrOculus]

No such thing as too much information! Thanks for the time and effort

 

[csricksdds]

No such thing as too much information! Thanks for the time and effort

Thanks for your positive reply!