On this options day trade we were looking to take advantage of the flush point pattern happening on the 5 minute stock chart on NFLX (Netflix Stock.). We had a known entry point, and since we were trading such a volatile contract, were out in a matter of 10 seconds. The good ole, 10 second trade. These are often times referred to as a scalp trade.
There was also an example of a fade as the S&P500 futures came into a key piece of market structure. Using /ES we were able to pick up a high probability trade off of the overnight low on an extreme oversold $TICK. If you want to learn more about the internals check out this video: Internals Recap Video
A key take away from this live options day trade is that you need to know the context of volatility and how to adjust targets. Obviously we should have considered the fact that NFLX options volatility was higher than normal and therefore contracts would move a lot faster than expected. Although there is nothing wrong with making some money in the blink of an eye, you can make a whole lot more if you are aware of the environment.
When trading options picking the right strike and expiration for the contract is key. On this trade we are using options contracts that are expiring this week, and using the strike just at the money, but not an in the money put option. If you want to learn more about strike and expiration selection feel free to join the discord server linked above and discuss in the trading community.
We used options instead of day trading the stock outright on NFLX because our profit potential is much greater and capital allocation is much less. Imagine needing $500,000 to have the same exposure that we had using only $415.