Effective Options Trading Strategies to Maximize Profits
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Understanding the Basics of Options Trading
In the world of options trading, misconceptions abound. Many claim that purchasing options is a fool's endeavor and that day trading options is an unattainable feat. However, this perspective is misguided.
The strategy I employed recently resulted in three successful trades, each achieving a remarkable 100% profit. I often share this straightforward day-trading approach, which involves going long on call and put options. When I explained it to a friend, I sensed skepticism about the possibility of such gains.
The principles of this strategy are clear and uncomplicated. If call options are trading above their opening price, it's a signal to buy. Conversely, if put options exceed their opening price, those should be purchased as well. It's essential to implement a stop-loss to manage potential risks.
Deciphering the Low of the Day Signal
The low of the day (LOD) signal is more intricate. This requires identifying the lowest point of the day for the option's strike price and having another reliable indicator to confirm that this moment presents the best chance for a reversal. The complexity arises from determining what constitutes a "trusted" indicator.
Recent Trading Results
As of September 25, 2023, I became distracted by the volatility surrounding the Federal Reserve's announcements. Consequently, I neglected to share the results of my trading strategy from the previous Wednesday, which had yielded a 100% win. I suspect only automated trading systems like TradeStation could have captured those trades—evidenced by the green and white flags on the initial chart.
The following day, after the Federal Reserve's meeting, normal trading resumed. The SPY 437 PUT registered a buy signal above the open right after the market opened, leading to a substantial 174% gain for that day trade (refer to the second chart).
In another instance, today's in-the-money 428 CALL, despite experiencing erratic price movements throughout the day, managed to hit the 100% profit target by the market close (as shown in the third chart).
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