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  1. Introduction - Day Traders
  2. Introduction - Day Trading and Options
  3. Types of Options
  4. Near Month In-The-Money Options and The Protective Put
  5. Stock Options and Weekly Options
  6. Mini Options
  7. Index Options and Mini Index Options
  8. Binary Options
  9. Options on Futures
  10. ES Weekly Options and E-Mini Options
  11. ETF Options and IRA Options
  12. Conclusion

Certain types of options are better suited to day trading. We will discuss some of the these option types.

1. Near Month In-the-Money Options. These are suitable for day traders trading options of highly liquid stocks.

  • Near month refers to options whose contracts expire at the end of the nearest month.
  • In-the-money options have already passed their strike price and the trader may exercise them.

The premium on these options is based more on their inherent value at the time that in-the-money options are nearing their expiration date. When this occurs, the effect of time value is diminished. These types of options are traded at a high volume, which results in a reduced gap between the bidding and asking prices.

2. The Protective Put. This type of option is employed when a trader purchases put options together with actual shares of the underlying stock. This strategy is recommended when the underlying stock is subject to high volatility.

Sometimes a day trader will repeatedly trade the same stock option over a prolonged period of time (perhaps a few months) so that she can capitalize on short upside moves. Also, day traders may apply the strategy of buying a put option on the same underlying stock as an insurance against sharp downward movement in the stock’s value. This is a way to manage risk. While the trader pays the price of a premium on the protective put, she gains the ability to limit losses in the event of a sharp downturn.


Stock Options and Weekly Options
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