Hello All
I have been going over options and have used options sparingly in the past. I've read up on them to have a pretty good understanding of how they work and I had some questions that I'm hoping people might be able to shed some light on. I'm fairly sure the answers to these questions may depend on my intentions so I will try to give as much detail on my thought process behind the questions as I can.
Most of my trading in the past has been strictly buying and selling the actual stock. Since I am not an active day trader who has time to be watching prices like a hawk, I usually do my research after hours, determine potential entry/exit prices and the like.
Options are a bit confusing to me not in their actual function but rather how one can do price research after or before hours. Options have their own prices based on the strike price (in the money or out of the money) as well as expiration. I think the easiest way to illustrate my question is to give a scenario.
Lets say I buy a single AMD call option for 1.40 with a strike price that is out of the money (lets say the price is 81 and I buy a call option for 84 dollars with an expiration of 10 days). The price of my options is 1.40, and it will move throughout the day back and forth. Below are a series of questions I have regarding this. For the purposes of the below questions, the trading I am speaking of just flat out buying puts or calls, nothing fancy.
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If my intention is to get into and out of an option contract within 2-3 days, is buying a 10 day expiration advisable given the theta values? And if I am going into it with such a short expiration, is it better buy in the money or out of the money?
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If I want to do my research after hours and put in an order so i can walk away and hope it fills the next day, can I still rely on the prices of each option set that is shown on w/e app I am using? Normally for actual stock price, I wouild look at the closing/opening price of AMD, look at the chart and some fundamentals and decide on a price for a limit buy order. Can I accomplish this same concept with options as well given how theta works with decay from day to day or can I really only rely on the point in time pricing of options.
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I wanted to dip my toe into options by using debit spreads since I could control my losses easier, however i dont have level 3 options trading on webull, but webull does allow you to place stop loss/take profit orders for options, this should in theory accomplish the same thing as a call debit spread without the benefit of a cheaper entry correct?
Please feel free to correct any misconceptions or things I have assumed I know above but is wrong.
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