Maximizing Profits: A Simple Day Trading Strategy for Options
Written on
Chapter 1: Understanding the Basics of Options Trading
Many people claim that purchasing options is merely a "fool's game" and assert that day trading options is futile. However, this notion is fundamentally incorrect. The trades discussed here are grounded in a straightforward day trading approach that focuses on going long with both calls and puts. I once explained to someone how to achieve a 100% return through day trading options, and I suspect he remains skeptical.
The entry signals are straightforward. If call options are trading above their opening price, then it's a signal to buy. Conversely, if put options are above their opening price, those should also be purchased. Simple as that! However, it’s crucial to implement a stop-loss to manage risk effectively.
Section 1.1: The Low of the Day (LOD) Signal
The LOD signal is a bit more intricate. It requires identifying the lowest price of the day on the option's strike along with another reliable indicator to confirm that this particular low, unlike others throughout the day, presents the best opportunity for a reversal. The challenge lies in identifying that "trusted" indicator.
Subsection 1.1.1: A Visual Representation
Section 1.2: Reflections on Trading Performance
On September 15, I shared insights regarding how to recover a month's worth of losses in a single day. After an exceptionally profitable August, trading SPY options through the first half of September resulted in losses—until today. Following five consecutive losing days, this simple strategy resulted in a 130% decline, equating to a $1,300 loss for every $1,000 traded going into the day.
However, the SPY 449PUT executed today reversed those losses, yielding a 171% gain by the close—$1,710 for each $1,000 traded—thanks to a clear "above the open" buy signal (refer to the strategy criteria mentioned earlier and the white flag on the chart's right axis in the provided link).
Chapter 2: The Dynamics of Winning and Losing Trades
In trading, only four outcomes are possible: a minor win, a minor loss, a major loss, or a major win. Minor wins and losses are simply part of market fluctuations, but it is vital to mitigate significant losses as much as possible to have a chance at capturing substantial gains.
It has taken until mid-September to realize a significant win that offsets all minor gains and losses from the first half of the month. Since then, the options day trading strategy outlined here has recorded six instances of 100% returns in the past eight trading days. Unsurprisingly, September is shaping up to be as impressive as August.
The put trade mentioned concluded with a 140% gain. Thank you for being part of our community! Before you leave:👏 Show your support for this story and follow the author 👉📰 Explore more content in the InsiderFinance Wire📚 Join our FREE Masterclass📈 Uncover Powerful Trading Tools