Day Trading Options

[xNICK]

Hey, I'm getting back into options from stocks. I have a successful strategy that stays in a trade for about 30 mins - 5 hours and never holds over night.
My Question is, How many days out should I start buying options for my strategy?
Thanks so much for your time and help!

 

[Panic!]

Depends on your strategy. Without any details, it's hard to answer this question. I'm assuming you ask this because you want to optimize margin usage without losing money due to time decay.

If you're using far otm/itm options, this won't be any issue, because intraday time decay will be close to 0 anyway. In that case it makes sense to buy options with the shortest duration possible.

If you're using (close to) atm options you probably want to be further out.

EDITED: Removed greeks.

 

[WklyOptions]

xNick,

Panic! is correct - the answer does depend on greater details of your strategy.

However - if it is truly a 30-min to 5-hr single day trading strategy, then the primary choice is dependent on how far out your Expected Move or Expected Target is from your Entry Price.

For example - if the Expected Move is "relatively Large" compared to the intraday price action volatility - then the use of the 1st or 2nd OTM may be reasonable with the Nearest Expiry series. Then you get Max Leverage using 1st or 2nd OTM.

If the Expected Move - Expected Target is small or less than 1-2 Strikes out - it is best to use the 1st or 2nd ITM Strikes.

Some options traders may prefer the ATM Strike - but again if you are trading 1 day - you may just want to max your $ Profit by going ITM where you get larger delta exposure (but higher $ loss if Entry is wrong).

Hope this helps. Good luck & good trading to you.

WklyOptions