Should I Trade Options or E-Mini Futures?

Should I Trade Options or E-Mini Futures?
By [http://ezinearticles.com/?expert=David_S._Adams]David S. Adams

I was looking over several of the article directories in the "day trading" section and found a wealth of information on trading options. On the other hand, there was scant information about day trading stocks or e-mini futures. I was stunned by this finding. While I write quite a bit about day trading e-mini futures, I very seldom look at the article in the directories. What a surprise to find such a large number of articles about options, and specifically, day trading options.
From the onset, let me say that throughout a 30 year career in trading, I am a very tepid fan of options, at best. Options do have their place in trading though, especially as hedges for positions and the stock market. For reasons I will discuss shortly, I have found them to be unsatisfactory instruments to day trade or to trade it all, for that matter.
Why?

I read several of the articles I referenced above just to make sure that I still understood options as I always have and it seems nothing has changed. The same problems that have plagued option traders for my entire career seem to be in place. Judging by the sheer number of articles, there must be a renewed interest in options as a day trading, or at least a short term trading vehicle. This trend confused me enough that I called one of my friends who is a broker and questioned him about retail traders and options and the problems they faced. He chuckled and explained that they are just as difficult as ever to trade.

Why do I think options are so difficult to trade?
� The potential trader has to pick a specific time he or she thinks the strike price will be in the money.
� The potential trader has to pick a specific price when that he or she thinks will be profitable.
� The potential trader has to work with a number of outside variables (i.e. extrinsic value, intrinsic value, time decay as strike date approaches, to name a few)
� The potential trader has to hold on to the option overnight or for a specified period of time which exposes him or her to market risk.
In short, a good option trader has to pick the time, price, and assume the risk over a period of time in order to be profitable. To a futures scalper, all of these variables represent the type of risk he or she works diligently to avoid.

Most of the articles I read were quite enamored of the leverage that options present to their holders, but the same sort of leverage can be achieved with much higher potential profits and the futures market. In the futures market, we do not hold trades overnight and most trades last around 15 minutes. This short holding period and greatly reduces the risks described above.
Day trading futures involves shorter holding periods, high leverage like options, and rapid movement in which to make trades. Obviously, a futures day trader doesn't have to look very far into the future to make his or her decisions. Generally speaking, our investment horizon is around 15 minutes. With such a short investment horizon, day trading e-mini futures takes a good deal of the risk of predicting the direction of a potential trade out of the picture. The same cannot be said for options.
There are some very good option traders out there, but they generally are highly experienced traders and have a very narrow focus in the methodology they employ in trading. As a futures trader, I don't have to spend hours searching for potential trades that meet the algorithmic criterion even day trading options require.

In summary, I have written some about the problems with trading options as opposed to scalping futures contracts. It is my belief that those problems in options are substantial enough to disqualify them from my trading preferences. There are simply too many other excellent trading opportunities out there that carry lesser risk.

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Article Source: [http://EzineArticles.com/?Should-I-Trade-Options-or-E-Mini-Futures?&id=7651523] Should I Trade Options or E-Mini Futures?