I am usually an income trader and rather trade positive theta trades, as it increases my chances of success. However, I often trade long options (negative theta) as a way to hedge and diversify some of my positions.
One of my favorite scans are trades that the break even point is 1/3 the ATR. That means that the average daily move of the stock is 3 times larger than the move needed to reach break even at expiration. This means that even a random move in my direction will be enough to show profit.
After scanning for these stocks (daily) I add them to watch list and start following them until i find a nice point of entry. I design the trade so the max loss is less than 3% the lost of buying the stock.
For example: $AAPL call strike 119 (price is 122.02) costs 3.7$. break even point is 0.6% and the ATR is 2.32$ (almost 4 times bigger) and expiration is in 10 days.
The volatility watchlist:
Try OptionSamurai for free:
- See all these stocks in OptionSamurai
- Soon we will launch a pre-defined screen for ATR scans. For now you can scan the results manually (you can even try it in the free demo):