Proprietary Trading

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I know that options allow you to control a large amount of stock value with a small investment. Put and call options are some of the greatest trading vehicles ever created. But day-trading the options is not one of those strategies.

Options are simply the wrong tool for that particular job, like trying to cut a board with a tape measure, drive a car to an island or cook a steak in a microwave. The first issue is that of trading liquidity and bid-ask spreads. For almost all options, the bid-ask spreads, as a percentage of their value, are much too wide for day trading purposes, although options trading for day traders indianapolis a problem for longer duration trades.

We enter and exit trades with precision timing as the price of the asset touches small-scale demand and supply zones. This can be very effective and lucrative, but it requires quick trade entries and exits. When we buy an option, if we want to get it done that quickly we will have to pay the asking price for it. Later, when we sell it, we will have to accept the bid price. When we have the time to wait, we can avoid paying the full spread by using limit orders. In day trading there is no time for that.

That alone pretty much rules out options as a day trading vehicle. Also, the thing that makes options unique is that there are three separate sets of forces acting upon their prices at all times. These expectations can and do change from moment to moment.

This causes option prices to inflate or deflate, completely separately from the effect of stock price changes. Sometimes the options trading for day traders indianapolis of current stock movement on the one hand, and of the expectations of future stock movement on the other hand, both act to push option prices in the same direction. But sometimes they act in opposition. Finally, there is the issue of time decay.

This puts steady pressure on option prices both puts and callswhile not affecting the underlying stock at all. So, even the best analysis of probable stock price movement alone does not give us enough information to trade options effectively, most especially over very short time frames.

We also need to assess market expectations. Are those expectations too high, making options overpriced and therefore a good bet to sell short?

Or too low, making the options an especially good buy? Answering these questions is not especially difficult, and we have great tools to options trading for day traders indianapolis just that. However, the effects take longer to play out than a few minutes or hours. Options trading for day traders indianapolis can make the three option forces into three separate profit centers when we use them correctly, as taught in our Professional Option Trader class.

Use the right tools for day trading, and use the finely-tuned instrument of options in the environment where they can really sing. Options November 10, Day Trade Options? Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever.

Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume options trading for day traders indianapolis responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein.

Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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Bower Trading is a full service commodities brokerage founded in by James Bower on the idea of providing investors, traders, and producers an avenue to participate as efficiently and as correctly in the high risk and ever-changing commodities futures and options market.

Bower Trading provides services customized to each client. Bower Trading President Jim Bower has extensive media experience that spans more than three decades.

His expertise on global market conditions makes him one of the most knowledgeable market analysts in the world. Bower Trading is a full service commodities brokerage dedicated to serving investors who stand to benefit from the commodities markets through hedging and speculative accounts. We think globally and execute locally, taking a worldview of the markets around the world while remaining laser focused on our clients.

With more than 60 years of trading experience, we provide the opportunity of thoughtful financial diversification and the absolute highest level of customer service. Disclosure Statement Futures and commodities trading involve significant risk and is not suitable for every investor.

Information contained herein is strictly the opinion of its author and is intended for informational purposes and is not to be construed as an offer to sell or a solicitation to buy or trade in any commodity or security mentioned herein. Information is obtained from sources believed reliable, but is in no way guaranteed. Opinions, market data, and recommendations are subject to change at any time. Past results are not indicative of future results. This material has been prepared by a sales or trading employee or agent of Bower Trading and is, or is in the nature of, a solicitation.

Sign up for a 2 week trial of our Daily Market Letter. About Bower Trading Bower Trading is a full service commodities brokerage founded in by James Bower on the idea of providing investors, traders, and producers an avenue to participate as efficiently and as correctly in the high risk and ever-changing commodities futures and options market.

Our Services Bower Trading provides services customized to each client. We think Globally World events, commodities and currencies are intrinsically intertwined.

We never forget it. The Bower Advantage Bower Trading is a full service commodities brokerage dedicated to serving investors who stand to benefit from the commodities markets through hedging and speculative accounts. Execute Locally Daily Market Letter The Market Letter will give you an intimate knowledge of these current market conditions from an experienced professional that will allow you to view the market like never before.

Speculative Accounts As the investor decides the trades, Mr. Bower and account executives personally give advice to each of their clients as to the continuing changing market conditions in any given situation.

Hedging Accounts Our staff has decades of experience from both behind a desk and in the production aspect, thus allowing you to make the most informed decisions possible.