Summary

The article discusses a simple and effective day trading strategy using QQQ options that can yield substantial profits, contrary to the common belief that buying options is a "fool's game."

Abstract

The article challenges the prevailing notion that day trading options is an impossible endeavor, particularly focusing on the strategy of buying calls or puts on the QQQ ETF. It emphasizes that with the right approach, day trading options can be lucrative, even with the inherent risks involved. The strategy outlined involves capitalizing on the liquidity and tight spreads of QQQ options, while minimizing time decay by executing trades within a single day. The article also stresses the importance of persistence, discipline, experience, and a reliable entry signal. A specific example is provided where a QQQ 442PUT option yielded a 200% gain by following the "Simple Strategy," which involves buying calls if they are above their open price and buying puts if they are above their open price, all while employing a stop-loss to manage risk.

Opinions

Buying options is often labeled as a "fool's game" due to the high risk and the fact that two out of three outcomes are typically losers.
Day trading options can be successful, especially with highly liquid options like those for QQQ, which offer tight spreads and minimal time decay over a short trading period.
The key to successful day trading with options is persistence, discipline, experience, and having a comfortable entry signal.
The "Simple Strategy" for day trading involves a straightforward rule: if call options are above their open price, buy the calls; if put options are above their open price, buy the puts.
Using a stop-loss is crucial to control risk when executing these day trades.
The article provides a real-world example of the strategy's success, with a 200% gain on a QQQ 442PUT option trade during the day.

The Simple Options Day Trade — $QQQ for 200% — 3/5/2024

They say buying options is a “fool’s game” and day trading options is impossible. So let’s say right off — they are wrong about that.

DAY TRADING OPTIONS

There are so many options strategies in the stock market the head spins — a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

But buying options…

Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks like AAPL, there are only three things that can happen — the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game, like everyone in options trading says?

For day traders it doesn’t have to be.

Let’s take QQQ options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for day-trade scalping with the weekly calls and puts on various liquid stocks. Must be stressed the key to trading the weekly stock option is liquidity in order to avoid spreads too wide to turn around a profit during a single day.

One last note: again, the key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable taking.

The Simple Strategy

TRADES are based on this simple day-trading strategy to be on the long side of the calls and puts for day trades; and referenced in this story — I told a guy how to make 100% day trading options and I doubt he believes me.

The open signal is clear and truly simple.

If the call options are above their open, buy the calls; if the put options are above their open, buy the puts.

That’s it, but use a stop-loss to control risk.

3/5/2024 — During the day…

Today’s QQQ 442PUT has gained more than a clean 200% as I write this.

I say “clean” because there was no chop-chop little losers at the open, which happens a lot and always more than anyone would want.

The 442PUT plainly crossed the its open, issuing its day-trading buy signal, and never looked back.

In other words, locking in these gains, is a good was it gets day trading with the “Simple Strategy.”

(The white flag on the chart’s right axis show the dollars/percentage gain for each $1K put in the trade. Click on the chart for a larger view.)