Make Money Day Trading Options - Two Overlooked Factors That Result in Big Profits
In order to make money day trading options two factors typically overlooked are economics and the fundamental psychological forces that move markets. Although many traders are getting excited about buying and selling in the stock market they often times get to focused on the individual securities and lose sight of the big picture. As we have all seen in the last few years (weeks!) of market movement, losing sight of the big picture can result in lost opportunities.
Recent Volatility Is a Boon for the Prepared Trader
Imagine if you will the good fortune of traders who happened to have put in trade-triggers for a limit buy order on Proctor and Gamble last week, or perhaps (even better) had absurdly low priced limit orders set up on call options for Proctor and Gamble. The prepared trader made a huge score in that stock (and a few select others). How might a trader have known a sudden collapse was possible? People who make money day trading options are usually ready nonetheless.
Psychological Forces Were Writing on the Wall
It turns out that there were some indicators of an impending turn in the market. One example is the options fear indicator, known as the VIX. In the days leading up to the sudden fall, the VIX was trading at or very near historic lows. When this happens the market is indicating a likely peak, with a pull-back likely. A high VIX indicates psychological over-confidence of market participants (too many folks believing the market will continue to rise). A discussion of the VIX is likely to be vital to make money day trading options, knowledge of how to use this information comes with observation of a variety of indicators.
Economic Forces Had Not Caught Up to Psychological Euphoria
While psychological forces indicated traders had spent too much time at the punch-bowl, economic indicators (while improving) had not demonstrated enough strength to justify the rapid market ascent in the first four months of the year. Even though earnings for many reporting companies came in at or above expectations, the results were not such that investors saw likely near term improvement in hiring (a lagging indicator). The result was a dearth of stock buyers support at any level on even the most secure of companies. Once the market makers shut off their machines it turns out there was no one left on the buy side, and prices fell suddenly and sharply. In order to make money day trading options one must account for sudden market movements, and be prepared to jump at the best opportunities for huge (and sudden) profits.
About the Author:
These three books on stock trading help improve understanding of market forces. Options trading is the fastest way to make money online fast by day trading. Low capital investors might consider binary call options, where trading can start with as little as $100.