Options Day Trading: 2023-10-30

Today I wanted to start to journal my experience with learning how to more actively trade options on the stock market. It gives me a chance to process the day, analyze some of my interpretations and decisions, and share any knowledge and lessons learned.

This isn't an introduction to options, an expert opinion (yet!), or financial advice. I am only sharing my opinion and personal experiences, mostly for my own benefit.

Before Today

Having already been familiar with options and done some longer-term options trading, I recently learned about "0 days to expiration" (0DTE) options that expire the same day they're traded.

Last week I did some paper money trial and error trading to get my feet wet. I started with some quick analysis of the current day's candlestick chart, decided if I thought the stock was going to go up or down, and bought an appropriate call or put option right around the current price.

That strategy did well enough, often seeing $75-150 in profit on a held option. It was more difficult to keep that profit when selling. Because of how quickly the price can move, doing a LIMIT sale would often miss the market and my profits would dip. Doing a MARKET sale would result in a price way off from the stated point where my profits were, eliminating a good chunk of them on sale.

What I think I learned:

• Paper trading is good practice in general, but when it comes to timing sales and capturing as much profit as I can, it was difficult to practice given both delayed data and infrequent trading compared to the live market.

What I'd like to learn more about:

• Why the MARKET price was so different from the given MARK price when selling an option I had a good profit in. I'm still not sure if this is an artifact of paper trading, or a misunderstanding of what the market price is. I do know that the spread of the option was not significant, a couple cents tops. So I'm a bit confused there.
• I know there are a lot of different options strategies that involve buying multiple options at the same time: spreads, covered things, iron things. I've watched a bit on this, but have yet to put anything into practice. Will probably give paper trading a shot on some of those before doing anything live.

Today

Frustrated a bit by the selling process, and seeing some generally good returns on the choices I made, I decided to hop into the live market today for the first time on 0DTEs.

My first trade (buying a call) went reasonably well, and I closed +$75. Sensing a dip, I bought a put next, but the dip reversed quickly and I closed -$170.

Meanwhile, my original call was up almost 50% since selling. Getting emotional about that missed opportunity, I tried to recoup by buying another call at a higher strike price given the trend. The option stayed horizontal, and due to 0DTE volatility it lost value and I was down another $100.

What I think I learned:

• Emotion will wreck you in this game. Keep it out of your decision-making process as much as possible. But I'm not surprised at myself, especially on day one. No regrets.
• The more emotional trades happened later in the day, which means closer to expiration, which means more volatility. I should probably trade earlier in the day, and hold a little longer (as long as it makes sense), rather than trying to play the minutes.

What I'd like to learn more about:

• What do the greeks look like for these trades? How do they change?

Let's see what tomorrow brings! 💰