Hello again everyone, I trust today and this week has been peaceful, at least outside of your investment accounts. Inside those accounts, it has been an absolute mess I’m sure given recent uncertainty. That said, today is Palm Sunday and the start of Holy week. To keep it brief, Jesus made the ultimate sacrifice so that you and I could be saved. Today, no matter what you’re going through please know that sacrifice was for us all. Thank you Jesus for paying the debt we never could!
In today’s post I want to focus in on an options day trading strategy using Thinkorswim’s 1st trgs OCO order type. If you’re not familiar with the 1st trgs OCO order have a look at this post, “ThinkorSwim Advanced Orders and Order Types”. That post will give you a brief but thorough understanding of all the orders available on the Thinkorswim platform. If that isn’t enough, you may also want to have a look at the Thinkorswim Learning Center – Order Types.
Before we begin, this options day trading strategy using Thinkorswim’s 1st trgs oco order requires absolutely no skill. That’s right, if today is your first day as an options trader, you’ll find this strategy particularly interesting. Admittedly, I wish I knew how to do this when I was just starting out.
Post Agenda
- Options Day Trading Strategy using Thinkorswim’s 1st Trgs OCO Overview
- Entering or Exiting the Trade
- Setting Up the Thinkorswim Order Template
Options Day Trading Strategy using Thinkorswim’s 1st Trgs OCO Overview
To get us started let’s look at the different parts to this strategy. At first glance it’s going to seem complicated but once you’re familiar with everything you’ll agree with the simplicity.
As I mentioned, you don’t need to have any knowledge of options (although it can help) to trade this strategy. Additionally, you don’t even need to be a good trader because the options day trading strategy using Thinkorswim’s 1st trgs OCO is going to literally do everything for you. Our job is to simply place the initial order.
Now, having said that the strategy is really just a strangle but its entered as two separate orders. If you’ve ever day traded options then you’ll no doubt have experienced the whipsaw action that can turn a profit into a loss or vice versa. If you’re anything like me, every time I lose I’m thinking, if only I opened a put instead of a call or a call instead of a put.
Instead of guessing which direction the market will go, I just decided to bet on both directions and eliminate myself from the equation. To do that I’m using Thinkorswim’s 1st trgs OCO order type. To say it another way, it’s a bracket order that’s put in place the second the long call or put is filled. After that, you can just walk away and come back to see how it went.
Entering or Exiting the Day Trade
The entry criteria is generally up to the trader. If you’re bullish, forget the put. Bearish, forget the call. However, since picking the short term direction isn’t always easy I’ve decided to just trade the strangle. Either way is perfectly acceptable and the information in this post is applicable to either.
That said, I’m at least trying to sway directionally. When I set up my trade, if I’m thinking price will move higher I want to own a higher delta call. If I’m more bearish, I want a higher delta put. That said, I haven’t determined a set delta that I prefer because volatility can change things frequently.
Instead, I’m looking at a maximum total exposure to determine the strike’s I’m buying. For example, if I had a $5,000 dollar account and didn’t want to risk more than 5%, I’d have a total of $250 to play with. Simply splitting that $250 in half means I have $125 for each side. Though, If I do have a directional opinion, I’m going to pay more for one side than the other. Again, just my preference.
Either way, I set the trade up to take a 15% profit or an 11% loss. These are my target preferences. You can and should change them to whatever you find most advantageous. For me, these give the trade enough room to move but are also routinely achievable.
Lastly, I don’t hold any of these trades over night. If for some reason the PT or SL wasn’t triggered I would simply close the trade manually before the trading day ended.
Setting Up the Thinkorswim Order Template
With at least a cursory understanding of this options day trading strategy using Thinkorswim’s 1st trgs OCO I’ll turn attention to setting up the platform. That way, everything is out of my hands.
To do so, here are the steps I’ll take.
Order Entry – Step 1
Change Order Type – Step 2
Enter Profit Target Order – Step 3
At this stage, verify that the “Link” column is set to TRG and the “Price” column is set to %. This allows for selecting the 15% profit target rather than a specific dollar amount that I would have to calculate for every trade. These setting are also required for the stop limit order below.
Enter the Stop Limit Order – Step 4
Save the Template – Step 5
Once each of these steps is complete I won’t have to recreate this complex order every time I want to take a trade. I can name it anything I want and then select it by right clicking on the options chain, select “Buy Custom”, and find the correct type. Here is one last image so you’ll know what to look for.
Final Thoughts
To close this post about the options day trading strategy using Thinkorswim’s 1st trgs OCO order type I should say, I haven’t lost a trade yet. Crazy enough, I’ve tested this for hours and haven’t had a single losing position. I either lose on the put and win on the call or vice versa. All of that coupled with no decision making is a recipe I really like.
At this time, I’ve been largely avoiding other options strategies while I wait to see what’s happening with Trump’s tariff plan. I like that volatility is higher and attractive premium is available but the swings up or down have been the largest I’ve ever seen. No premium is worth the anxiety that I’m seeing in the market right now.
That said, this simple Thinkorwim hack makes trading options an absolute breeze. The 1st trgs OCO order type can be set up for any options trading strategy and essentially eliminates the need for babysitting a trade. Although, as I’ve outlined above I really prefer it for day trading. I don’t have to stare at the screen all day and generally volatility throughout the day isn’t a major concern. The only caveat to that would be if there were some event announcement or unforeseen news that caused the market to respond immediately. Which, as I think of it now, is very likely when Trump sends out a truth social post.
In any case, until the next post.
God bless,
Jeff
