What to trade: Futures or options?

Folks,

Pardon a newbie question but what are the pros and cons of automated trading of _options_ vs. futures?

From what I read it seems that most options trading is discretionary.

My first and only trade ever was a directional play on AOL when they announced unlimited modem dial-up for $20. I borrowed $700 from a credit card and bought two calls to give the stock more time to go up.

I was up to $1900, decided to wait until I tripled my money but did not anticipate that AOL would get into trouble in the stampede of subscribers that they did not have enough modems to support.

The stock went down, I waited and finally exited with a $100 profit. I think I paid ~$400 in commissions to Bear Stearns where I worked at the time.

I'm a good programmer, can probably program anything but I'm encouraged by a post SteveH on EliteTrader not to try to build things myself.

Still, I'm trying to decide whether I should try to learn directional, delta-neutral, volatility, etc. option plays (at ThinkOrSwim?) or go into testing of automated futures systems using whatever software I find most suitable.

I do have a full-time job at the moment (2 consulting gigs) and while that brings enough money to fund a trading account, it does not leave much time for real-time trading. I could probably squeeze an hour at the opening, though, since I'm 6 hours ahead of CST.

I would like to leverage my programming skills somehow, as well as my understanding of the software, internet, etc. industries.

Any advice? Suggestions?

Thanks in advance, Joel

theta is your enemy in options. if you think you have a directional play right, trade futures

Joel Reymont said:

Pardon a newbie question but what are the pros and cons of automated trading of _options_ vs. futures?

Click to expand...

In terms of automated trading, you probably want to focus on futures for the simple reason that you have access to electronic markets meaning you can get in and out of positions more quickly with minimal slippage and good liquidity.

Arbitrageur said:

theta is your enemy in options. if you think you have a directional play right, trade futures

Click to expand...

Theta can be made irrelevent if your directional trades are fairly short-term in nature, at least in terms of the time to expiration of the option in question. For example, if you do a 1 week trade in an option with 3 months to expiry, time decay is going to be scant.