How I Trade Options (Simple Scalping Strategy)

how I trade options and my scalping strategy so I'm a scalper by Nature regardless of what product I'm trading if it's stock if it's options the name I scalp that's my style overall but I've gotten this question a handful of time so I figured I would do a video on how I trade options kind of the strikes the thought process behind it and the goal really is I'm just scalping them I'm not holding them long-term not swing trading these things it's I use the options as a means to take the trade and then I take the quick moves so I just want to go over exactly you know how I'm doing it and a good example today today's Wednesday June 3rd Boeing Boeing had a nice breakout day and kind of interestingly enough how I did a video on Tesla a few days ago if Boeing so look this it's clearly catching some momentum if this close is strong today and then it has a little bit of a weak open tomorrow I will be looking for a second day continuation set up on some weakness if it opens weak if it gaps up huge that's a whole different that's a whole different different trade and different setup but if it has a little bit of weakness I will be looking for today's high that'll be the line in the sand so that'll be a possible trade opportunity mentioning it prior to it even happening because if it sets up like that it'll just be interesting to see you know how similar the patterns can look when name start to catch momentum but regardless of that today so bowling got pretty tight on the daily bowing has been really beat up really beat up this thing was almost a $400 stock traded below a hundred it's at 170 right now so took a 50% haircut so I think that eventually there was gonna be an opportunity and today it broke out had some consolidation caught up to the moving averages the prior pivot high was this green line right here 156 70 we were trading right around there pre market and unfortunately I missed this I missed this trade I ended up trading z:m today just because it was it was a clean setup and I was watching a handful of names and I didn't take advantage of this so I want to do a a little bit of a recap on this to just you know realize I missed an opportunity and how I would have tried to trade it in my head kind of go back and do a little bit of a review recap on what I would have done so now some of the levels what I'm looking at 157 50 was pre market high I always like to job pre market high pre market low and then maybe a major daily level and if it's a major daily level to the upside I'm a green kind of like a breakout level if it's a major daily level to the downside and I'm interested in possibly shorting something even though I like to go long a lot more now I'll make the line red so I have an idea even though I'm looking at a lower timeframe chart I have those major levels upside breakout downside breakout and I color coordinate them and then I also make pre market high pre market low baby-blue just a color I chose so right off the open here's Boeing right off the open I don't really see a setup I mean if anything maybe there's an opening range break to the downside right because as just strip push straight up off the open hard to chase I try not to do that and then quickly fail set the whole number one two three four five six minutes consolidation and then it finally breaks it so technically this is an opening range break the downside but Boeing is strong on the daily so I'm not looking for that kind of trade I'm trying to follow the trend even though I couldn't scalp this short the the trend is up so now I'm just I try to wait for okay let it wash out if anything that could mean it you know trap some shorts and then if we go back towards those highs that could be a possible setup so now what does it do quickly finds a bottom starts to work its way back to the high and then right here is where it's set up in my opinion so high a day this is more of a technical level momentum break scalp that I like the setup that I look for I have I like the opening ranges that are quick off the open and the technical level break technical level momentum breaks gaps that are like 30 minutes plus into the day once you know a high and a low have been established and then once we consolidate towards those areas and Boeing found a bottom reclaim view app not following the nine moving average and the hi of day was 150 808 so that's clearly that's the technical level what I try to do is I try to get an entry prior to that and this is where I see a pretty clean opportunity because the trend is clearly up buyers have taken control the chart looks good the daily chart so bigger timeframe analysis looks good now the pivot high was 157 73 so that is the pivot so this pullback to the 9 and once it cleared it this would be an opportunity to go long and then even even if I felt like I really wanted to wait for some for confirmation wait on the next candle and take it prior to that high break and look how tight it is so now there's you know risk is not too far away and I'd like to get in and have a go pretty quick so just as an example of what let's say I got in prior to 158 let's say I got in 157 90s because I wanted to really wait for confirmation price gets really tight 157 90s I'm going to pull up an option chain now I'm gonna just go over the basics I'm not going to do an in-depth analysis at all the Greeks of options and exactly how they're made up but if you're brand new to options calls mean you make money when the stock goes up the calls go up in value as the the price of the stock goes up puts the value the the price of the options go up as the stock goes down so if you're trading calls you're long if you're trading puts just directional calls and puts you're short so what I do is I'm looking for I try to get a strike as close to where the price is currently trading now I am not too worried about looking into the Greeks theta Delta I know some people get you know when you're doing very complicated complex option trades those are important factors I am 100% using the stock chart to trade where I put entry exit where I take profits I am watching the chart I'm watching price action all I'm doing is when I see the area that I want to go long or short I'm clicking by on the the option that I want to trade so if I was going long prior to the 1:58 break I would trade the 160 calls and they're very expensive now because Boeing is Boeing you had a massive day but these were much cheaper when it was trading around 158 so I would do just out of the money and a lot of times I wait if they're not to spread II remember I'm a scalper so I'm looking for an immediate quick move in price so I am not messing around with limit orders if the spread is too wide on the options I will let it go by but the moment the spread gets tight enough I will market order in and I typically trade anywhere from three to five contracts I'm willing to eat the difference in the spread because if I believe it's gonna go quick the spread won't matter as long as it's not too big if it's too big I'll avoid it so you know I gotta be you know I make it a judgement based on where the current spread is and all I'm doing is I have it up so I'm watching the chart I have the amount of contracts that I want to trade and right at that price preset because a lot of times I have a minute or two to make that decision so I'll click on the 160 I have it populated my order entry for 3 4 5 contracts and then I have my mouse-over the submit button watching price action watching price action ok I want to go long submit I'm not focusing super aggressively on Delta on cuz I know that if I'm trading very close to where the stock is currently trading the options will move they may not move penny for penny they may not move penny for penny but they will move and they'll have a decent move so because I'm scalping I'm taking I'm I'm getting into that position right where I want to be long or short and then the moment that the price action starts to slow down I cut the position and then I am looking at my piano after the fact and then it's okay that's what I made so I'm not this can be very complicated if you make it so I try to make it as simple as possible and I'm just using the options as a way to take advantage of the move so that's how I would have traded this and then there was even just to go over some other examples I try to I don't trade too you know usually the first hour because a lot of times I've noticed that my accurate the accuracy goes way down after the fact but just to even go through and just show some other setup so Boeing had a massive day I mean this is it's probably still going and just yeah we're almost at 170 I mean this thing is crazy day so let's just say I'm gonna go through the chart and just kind of look at some other other possible patterns and setups and see what I would have done see here's a good example right here so this thing consolidates towards the highs right the nine moving average is right near price action a little bit of a flag pattern we crack 160 that would be my trigger to give it a shot see if there's more upside room risk could be off that you know I would risk up that pivot low so risking only about 50 cents I would have traded the 160s so right at the money so these would have moved a lot because it's right at the money that's ideal in a perfect world I like to take if I'm going long I like to take a contract that's right at the price of where I current want to be long at so this is a great example long at 160 able to get into the 160 calls so those are gonna move pretty good and I'm not once again I'm not overthinking and looking at all the details it's just okay one of the long 160 I'm gonna take the 160 calls I'm gonna take those strikes and I always trade the same week I'm not swing trading these so I'm not worried about the theta burn I'm only scalping four minutes at a time so I always do the same week so they can move as close to penny for penny with the stock as possible now let's just keep going through and I'll just keep kind of giving examples so here's another set up right it's kind of Flags catches up to the nine moving average breaks around 160 to 50s let's say I think that this has more upside room I'm gonna be trading on this specific pattern right here the 160 250 call so here's a couple good examples of being able to be in the calls that are almost exactly right where the price is trading that's ideal sometimes I don't get that and it's ok I just deal with it but that's a perfect example of being able to be in an option that is almost identical to where the price is currently trading at and I'm just gonna I'll keep going cuz I think there was one more I I would not at these prices I think bowling is extended and I wouldn't continuously just keep chasing higher because even though today is a massive uptrend day on Boeing probably an all day uptrend I know that if I continuously keep chasing price it's just it's not a good habit for me so I avoid that but here's another opportunity so long period of consolidation catches up to the 9 breaks above 183 50s is about the area now here's an example of where it's hard to get contracts at that price so I'm just gonna go to the next out-of-the-money strike I like to trade just out of the money cuz if it goes against me they I don't get hurt too bad but then there's also the downside that if it does go in my favor it doesn't move as fast still moves just not as fast so let's say I want to consider going along right around 163 40s into hating the new high daybreak I'm gonna be trading the 165 strike so here's an example of just out of the money because of where the stock is currently trading and I'm not able to get into a strike that is right at it so I go next out of the money and it would be the 165 and then at these prices it just keeps continuously keeps getting I mean look at this even another one 160 the highs right around 167 consolidation following the 9 nice just continuous trend catches up to the 9 breaks the whole number let's assume I wanted to go long right before the 167 crack I'm gonna use this is another good example of being able to be in a strike that's close to the current price and 167 50s same week expiration always and then Boeing is just mean what a what a beast of a move so I think hopefully you get the you get the picture of how I'm looking at it and I I don't I don't overthink it I know some people can really overthink it I'm just using the option as a way to be involved and I'm trading the names that are more liquid like I'm not I don't trade options on Chipotle and some of the names where they're illiquid and the spreads are really wide I'm only using options on the stocks that are a little bit more expensive and have really good liquidity so the spreads are for the most part pretty tight because if you just go try to trade options on any name especially one that doesn't have a lot of daily volume those the option liquidity can be pretty bad and if they go against you not good the spreads can really widen up and you take you take a huge loss so I'm typically trading options in the same basket of names Tesla Netflix Facebook Apple Boeing very liquid high-volume name so I don't have to worry too much about any sort of widespread in them that's how I do it I'm interested to see if anybody else trades options and how you trade it so let me know let me know in the comments if you trade options how you do or if you're looking to get involved in trading options because it's a very interesting way to to be involved in trading especially because there's no PDT will bind them you can open up a cash account and trade options and be and be under the 25k and trade as much as you want so there's a lot of benefits there and there is some negatives too but under 25k a great way to be involved so that's it thanks for watching and I will see you in the next video

Channel: Matt Diamond

Views: 82,430

Rating: 4.9268737 out of 5

Keywords: how to trade put options, how to scalp options, options trading strategies, day trading options, simple scalping strategy, options scalping strategy, scalping strategy, scalping options, options scalping, scalping calls, scalping puts, scalping calls puts, how I trade options, trading options, trading call options, trading put options, options trading strategy, scalp options, scalp calls, scalp puts, trade calls, trade puts, trade options

Id: hPSgdXcERo4

Length: 15min 29sec (929 seconds)

Published: Wed Jun 03 2020