Is it possible to become a millionaire by trading the same volatile stock over and over again using options?
I want to know if it is possible to trade a single volatile stock over and over again by trading options and become a millionaire? Also, If this is possible I have found a stock that is very volatile, and that’s First Solar, Inc. It moves up and down between 2-5% every day and I know that the best way to trade a stock like this is using the straddle options trading strategy. Could this work and have there been any recorded cases of this ever happening at all by someone actually doing this?
Hello. Very good question.
When buying options on highly volatile stocks it is important to be aware that your are going to pay a higher premium due to the high IV (Implied Volatility) levels of the underlying stock, in this case FSLR. All that Volatility is baked into the cake so to speak. There is a chance that even if you do get the expected move that you would only be breaking even or worse loose money.
I know that this might sound kind of crazy, but this the nature of option contracts. Options have certain sensitivities associated with them, known as "the Greeks" . Vega, Theta, Delta, etc.
You might be better off trying to find a less volatile stock where the market is not expecting any big moves. These stocks would have lower implied volatility levels and would be cheaper to buy and you would stand to make considerably more profit if the stock did make the expected price move.
Without making this more complex than it has to be. Just understand that stocks that are highly volatile have options with high "Vega". This means that you are going to pay a higher premium for these options due to the fact that the stock has a higher probability to move in either direction.
Now, Consider this. For every buyer there is a seller on the other side of the trade. Another strategy might be to find a volatile stock that you might actually want to own and instead of buying a decaying asset such as a long put or a long call, maybe sell a put instead. This way you could keep the high premium due to the increased (IV) levels, reduce your cost basis on the trade if you were to get assigned and have time decay(theta) actually working in your favor.
Don’t get me wrong, there is a time and place for all option strategies. There is nothing wrong with buying puts and calls or both. I am just trying to show you that there is more than one way to capitalize off of your views on the market.
Please feel free to visit our web site optionsimple.com for more information regarding basic, as well as advanced option trading strategies. It’s very important to know alternative option strategies prior to committing large amounts of capital to stock options. You would be very surprised at all the options you did not even know you had. Some other great sites for learning about options are cboe.com and optionmonster.com.
Oh, and yes it is possible to become a millionaire trading options, only with the proper RISK MANAGEMENT!!!:)
I wish you nothing but the very best in your endeavors. Good luck my friend:)
~Mr. Simple
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Is it possible?
Yes.
Will you be able to do it?
Probably not.
References :
First of all, options gives you options, therefore they are very complex.
Your question is complex as well do to the fact that you want to trade a volatile stock. The problem with that is when you buy the options that are inflated with premium and then the stock makes a big move, your premium on your straddle might go down as well.
About the best advise I can give you is to go the the CBOE and learn as much as you can about the different strategies. Call them and ask for their pdf on Hockey Sticks. Then paper trade your strategies. There are usually more sobering moments then of jubilation.
Good Luck,
References :
http://www.cboe.com
It actually depend on your skill and the tool that you’re using. I am using Stock Assault 2.0 to make a decent amount of income and you probably want to check it out too.
References :
http://internet-stocktrading.org
Hello. Very good question.
When buying options on highly volatile stocks it is important to be aware that your are going to pay a higher premium due to the high IV (Implied Volatility) levels of the underlying stock, in this case FSLR. All that Volatility is baked into the cake so to speak. There is a chance that even if you do get the expected move that you would only be breaking even or worse loose money.
I know that this might sound kind of crazy, but this the nature of option contracts. Options have certain sensitivities associated with them, known as "the Greeks" . Vega, Theta, Delta, etc.
You might be better off trying to find a less volatile stock where the market is not expecting any big moves. These stocks would have lower implied volatility levels and would be cheaper to buy and you would stand to make considerably more profit if the stock did make the expected price move.
Without making this more complex than it has to be. Just understand that stocks that are highly volatile have options with high "Vega". This means that you are going to pay a higher premium for these options due to the fact that the stock has a higher probability to move in either direction.
Now, Consider this. For every buyer there is a seller on the other side of the trade. Another strategy might be to find a volatile stock that you might actually want to own and instead of buying a decaying asset such as a long put or a long call, maybe sell a put instead. This way you could keep the high premium due to the increased (IV) levels, reduce your cost basis on the trade if you were to get assigned and have time decay(theta) actually working in your favor.
Don’t get me wrong, there is a time and place for all option strategies. There is nothing wrong with buying puts and calls or both. I am just trying to show you that there is more than one way to capitalize off of your views on the market.
Please feel free to visit our web site optionsimple.com for more information regarding basic, as well as advanced option trading strategies. It’s very important to know alternative option strategies prior to committing large amounts of capital to stock options. You would be very surprised at all the options you did not even know you had. Some other great sites for learning about options are cboe.com and optionmonster.com.
Oh, and yes it is possible to become a millionaire trading options, only with the proper RISK MANAGEMENT!!!:)
I wish you nothing but the very best in your endeavors. Good luck my friend:)
~Mr. Simple
References :
http://www.optionsimple.com
http://www.optionmonster.com
http://www.cboe.com
Ok, I am going to cut straight to the chase.
NEVER use straddles on a volatile stock… its not going to work intraday, Period. I tried that.
The only way you can play intraday 2 to 5% moves is to play it directional by buying call options when its trending up intraday or buying put options when it is trending down intraday and then selling the positions on a one or two points move. Fast in fast out. Millionaire or not using this method depends on how much you are trading with and how aggressive you are.
In fact, if you want to be even more aggressive, options isn’t the best instrument for intraday trading. Try futures. But always remember… if a method can bring you +1,000,000 quickly, then it can also bring you -1,000,000 just as fast.
References :
http://www.optiontradingpedia.com
http://www.futurestradingpedia.com