Day trading ETF options

[gojeff]

Hi people,
I am interested in trading ETFs like SPY, QQQQ, etc. but I like the leverage of options. It appears that the commissions of my discount broker (and most others) will make this cost prohibitive. Please help me out -- am I understanding this correctly?

For example, the SPY LG (Dec-2009 $111 call) is at $1.80 today. E*Trade charges me 9.99 flat plus 75c per contract. The 75c per contract (each way) completely kills this deal. Even Tradestation charges $1.00 per contract.

How can anyone make money trading options this cheap when the commissions kill it? It must be feasible for someone because I usually see a lot of volume on the major ETF options.

Thanks for your help!
-Jeff-

 

[Hittfeld]

FIrst of all, few traders I know trade options intraday due to high costs ( spread, slippage and commissions). Commissions are the the smallest part of the problem. The sheer volume you see doesn`t mean it`s going to be turned around the very same day.

Surely you are aware that you pay the commssion of USD 1.00 only twice per contract, that the premium or gains are hundredfold - i.e. USD 2.00 per 180.00 premium for the contract (USD 1.80 for each of the 100 shares of a contract). So, if the premium goes up 30 cents this means USD 30.00 gains minus 2.00 profit equaling USD 28.00 net profit.

Regards

Hittfeld

 

[tripleogstar]

another major point your missing is that the people who are responsible for all the volume are hedge funds, banks, large trading firms etc, and they dnt pay a significantly lower commission with their brokers.

 

[goonior1]

The main disadvantage that I see is the wide bid-ask spread...even on the most liquid issues, you will probably eat $0.03-$0.05.
Options are great for swing trades, but I find them difficult to use on an intraday basis.

As for brokers, unless you are trading a large number of contracts, places like IB (I use them, so I'm familiar, but I'm sure there are others) will be your best bet, especially if you trade a fair number per month (I think IB starts at $0.70/contract and works its way down with volume).

I've also hear of places that charge a flat fee for almost unlimited numbers of contracts (OptionsWorld or OptionsHouse or something to that effect), but I've never investigated them since I haven't hit the "big time" yet.

 

[OptionTimeline]

Hi people,
I am interested in trading ETFs like SPY, QQQQ, etc. but I like the leverage of options. It appears that the commissions of my discount broker (and most others) will make this cost prohibitive. Please help me out -- am I understanding this correctly?

For example, the SPY LG (Dec-2009 $111 call) is at $1.80 today. E*Trade charges me 9.99 flat plus 75c per contract. The 75c per contract (each way) completely kills this deal. Even Tradestation charges $1.00 per contract.

How can anyone make money trading options this cheap when the commissions kill it? It must be feasible for someone because I usually see a lot of volume on the major ETF options.

Thanks for your help!
-Jeff-

Day-trading in options is not recommended for the private investor not only because of high commissions - it is simply very very risky and most of the traders are constantly losing.
IMHO (and experience) the only chance to make money in options is using strategies. It is still risky, but strategies let you minimize the risk by hedging the potential loss, while trying to maximize the profit.
Please try paper-trading first at http://optiontimeline.com

-- OptionTimeline

 

[JoePistole]

As others pointed out here that strategy can be expensive for the average retail trader. If you do pursue this strategy, at least open an account with OptionsHouse to save yourself some fees. IMHO, Etrade is not the place for active options trading.

 

[morgan2074]

Hello everyone.
I am new in this trading field and dont know much about how to trade to earn better profits, So please suggest me some website that helps me in earn more.

Binary options