One of my favorite options strategies that can be used for any style of trading, whether you are a swing trader or a day trader, involves playing weekly options. I want to lay out a few simple but powerful tips I wish someone had told me when I first started trading.
The first thing I would focus on as a beginner trader is this simple, low-capital strategy that can provide life-changing opportunities.
Start with buying calls and puts.
There are many strategies you can choose from call credit spreads, debit spreads, butterflies, broken butterflies, etc. As beginners, it’s important to understand how to trade options in a “normal” manner by simply buying calls and puts.
One thing I stress for beginners is to trade bigger picture setups. The market is always moving but if you can remain patient and wait for larger picture setups to form, you’ll have more success than trying to trade the smaller setups.
In a high-volatility market, there are bigger picture setups every week that we can work to our advantage. It takes discipline to ignore the smaller moves and tempting little trades, but we want to focus on the larger moves.
This discipline can grow your profit potential, make your trades happen quicker in a bigger fashion, and allow you to trade with more confidence and an edge.
I recommend all traders focus on the squeeze.
The squeeze is one of the most powerful and straight-forward setups that you can start to wrap your head around.
As options traders, the squeeze is our best friend.
When price rips, options are exploding. When price chops and squeezes, options are cheaper. Once price rips or drops, the options explode – this is the squeeze releasing, up or down.
The squeeze can help you plan for larger picture trades.
The daily squeeze is a great example of a bigger picture trade in the overall market. We aren’t looking at a three-minute chart, hourly chart, etc. We are stepping back and looking at the bigger levels that will actually move price.
When the market starts to dump hard, any pop is a shortable opportunity. Understand that if you can catch the top of the bounce and the squeeze fires, you can make a big move and catch a lot of the drop.
Here is an example of shorting a market pop with a squeeze:
SHOP is firing a daily squeeze to the downside, offering opportunities daily to short it and ride a nice easy wave of straight selling.
On Thursday in Simpler Day Trading, we played SHOP on a rally from $2.40 to $4.20 for a 75% return, while leaving runner targets at $9.00+. This is what it looks like to hold this type of trade.
As a new trader, look for one good trade per day. Let it ride and have a good thesis for your setup. We are taking advantage of the gift that options provide – which is massive leverage.
Zoom out, look at the big picture, understand where you can get a good entry, and let the market work for you. If you build your plan on the bigger picture like daily and weekly charts, you can get a killer setup and grow your success as a trader.
As you get better daily, you can begin to explore the different trading strategies that fit your style best.
For a deeper dive into the squeeze indicator referenced above, check out Taylor’s video going over how to trade the TTM Squeeze.
Stay Focused!