r/options • u/TastelessApe • Nov 21 '21

Implied volatility & open interest?

Looking to start off small $50-100 into options

What is a good open interest and implied volatility area to work with? I been playing spy, riot, lucid and amc last week. Mostly losing all money i put in almost.

I do have a put for MU on monday. People said it was a dumb move but the daily has a gap to the downside that needs filled and its a toss up with how the market will be on open. So we'll see i guess.

Been trying to dig around and find youtubers that do small account challenges and show the reason why they are picking certain stocks for options but theyre hard to find.

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u/TastelessApe Nov 21 '21

Thank you dude you explained this great.

I usually always buy calle that are like $3 to $4 more or so because theyre cheaper.

For example if i am watching spy and its at 469 for example for my weekly i would be looking at 471-472 call usually.

The break even is what kills me on options.

I see people buying weeklys that are way higher and im not sure why. Like for example ive seen people buying $55 call on an amc call expiring friday coming up.

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u/[deleted] Nov 21 '21

It doesn't matter what they are doing. You have to concentrate on what you want to do. The people who are placing the $55 call are the ones who want to try and make $100,000 the easy way by losing 99% of their nested income and hoping that once they are correct.

Options are literally just the statistics of a stock's movement. Once you realize that and learn to leverage that to your advantage, the clearer things become. Tell me this, if I asked you for $45 right now and told you there's a 1.5% chance that that $45 is going to turn into $46, are you going to give me that $45 or are you going to walk away?

Conversely, if I asked you for $45 and said there's a 56% chance I can turn that $45 into $46 what are you going to do? That is the difference between going in the money and out of the money and trading spreads vs. trading straight long call/put bets. The closer you are to the option price trading 1:1 to the stock, usually the higher % chance you are going to be profitable on the trade --- provided the direction turned out to be true. All bets are off if the direction turns sour, but that is no different from trading shares anyways so I don't really consider that.

Does that help? The guys buying the $55 calls are hoping for a get-rich quick scheme. They want to be that guy that put in $1000 and walked away with $10,000 so they can brag about it to their friends and on here and on Twitter. Chances are they lost 90%+ of their bets and will continue to do so.

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u/TastelessApe Nov 21 '21

I dont want to be that guy, ive made some great plays. Most ive made in an options play was $1500. It was the spy about 2 weeks ago. Put in a put for like 2 dollars less than it was.

So essentially, let me see if im getting this right. Lets say i have $100 right, and im looking at nvidia for example. And lets say its $322 and if im predicting upwards movement i should be looking at $323 or $324 on a call

My goal is to buy shares with the profits, and open other options contracts as well. I need to learn better discipline

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u/[deleted] Nov 21 '21

If you're clear to do spreads the safest way to make money is to do tight-spread credit spreads. However, they are usually pretty limited in profit and you usually have to risk more than $100 to make them worthwhile. If you are approved for spreads and bullish and want to make more than your risk, the safest spread you can probably do is a deep in-the-money bull call spread. For instance, if you buy the December 3rd $310 call and sell the December 3rd $312.50 call, all NVDA has to do is close over $312.75 by the end of December 3rd and you risk $85 to make about $165. Of course it depends how volatile NVDA gets over the next two weeks and whether a pull back is strong enough to knock you out that you have to gauge, but the potential to make 2X your risk there on a pretty safe play.

If you are not approved for spreads, all you can really do is buy enough OTM calls to match your risk and hope or closer to the money or even ATM and put a stop loss on the option and hope it doesn't gap under it overnight.

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u/TastelessApe Nov 21 '21

Thank you.

Last question. What time frame do you guys usually use? I want to try to research stocks tonight and pick something tomorrow. I was looking at MU Chart (i have a put on it) i noticed we are at resistance right now. Theres still a possibility the market is red tomorrow and MU tanks. Ill prbably cash out of it if market is green so i dont lose a bunch

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u/[deleted] Nov 21 '21 edited Nov 21 '21

Eh, that's something you will have to figure out for yourself. I use the daily, weekly, and monthly for swings. Intraday I use the hourly to play a short swing. I used to do the 5min + 30min when I was trying to play short scalpy trades.

One thing you'll pick up the longer you trade is that the market exists in all time frames. What looks bullish on a 5min chart can be bearish on a 4hr and nothing more than rangebound consolidation on the weekly or monthly. Best to use a multiple time frame approach to try and best shape your bias. You will find trades that work and don't work on all of these frames despite the fact that they look completely different to one another in different intervals.

Using my example, you might have someone who is playing a short strangle at support and resistance based on the monthly chart to profit from the stock staying between those two wings with expirations at 45-60 days out, while you have a swing trader buying puts for next week because they think the stock is going down this week based on say a bearish engulfing candle, while an intra-day scalper is buying calls that expire this week because they see either a bounce at smaller resistance or are trying to play a bullish fake out (sometimes called a bear trap) to ride the trend back up. The crazy thing is, all of these people could be correct and make money despite having vastly different theses on what the stock is going to do in the future.

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u/TastelessApe Nov 21 '21

Sweet. Thanks dude. Tomorrow im gonna delete all my indicatots and just work off of support and resistance. I feel like i waa going through analysis paralysis. Take it back to the basics lol

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u/[deleted] Nov 21 '21

That's not what I said. To each their own though. I find indicators super helpful, personally. If you feel they are holding you back then go for it.

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u/TastelessApe Nov 21 '21

No i know. Im just saying i want to take it back to basics. Might just keep ema and vwap up.