Basics Of Day Trading Options

Day trading options has become extremely popular. Most every stockbroker offers online Stock option trading these days. Online Stock option accounts typically offer real-time data and virtually instantaneous order execution. This gives the options trader quick access to the information they need and the ability to enter and exit trades with relative ease and speed.

Another important cosideration for the option day trader is the liquidity of the option to be traded. Typically the more liquid the option the smaller the bid and ask spread. Typically the more liquid a stock is the more liquid its options are.

They trading options effectively requires that the underlying stock has sufficient price movement throughout the trading day. Quite obviously, stocks that don't move very much won't have options that move very much. Price movement of some magnitude is necessary in order for the options trader to have an opportunity to profit.

There are a number of effective ways to day trade options. Some traders may use supporting resistance methods. They may choose to either buy puts or cell calls as the chosen stock mirrors a predetermined resistance level or conversely they may choose to buy calls and sell puts as the underlying stock approaches support.

As an alternative to the support and resistance strategies mentioned above some traders may choose to trade on breakouts of support and resistance in anticipation of continued momentum in the direction of the breakout. In this case the trader would buy a call option or sell put on the breakout of a resistance level and conversely buy a put option and sell a call option on the breakout of a support level.

Another popular method of day trading options is trading based on volatility. If the volatility of the underlying stock proves much higher than anticipated, the trader may choose to sell an option to take advantage of the premium that has just been inflated by the increased volatility. On the flipside of the coin the trader may choose to buy an option during a period of especially low volatility anticipating that the value of the option will increase when the volatility returns to normal.