Bell Direct decided to finally roll out ETO trading, so I decided to give it a go, as it's too boring not being able to make money when the market is dropping. So far I've only bought and sold XJO puts.
I have some questions now.
1. It seems to me a suspiciously easy way to make ridiculous profits. 30-50% single day ROI? I presume the same can be done for calls when the market goes up, so then what is the point of trading actual shares? What stock is going to consistently give you such a return on any given day? I mean of course, it's not going to be clear every single day which way the market will go tomorrow, but quite often it is, so why even bother with anything else?
2. Given the market depth at any one time, it seems that these options are very illiquid - the spreads are often fairly large (though move quickly), and the number of options to buy or sell at any time is pretty small. So if you had some large amount of money, say $100,000 - I don't see how it is at all possible to trade even those XJO options with the highest volume.
Am I missing something here - ie. are there market markers obliged to always give you a transactions? Will they always give you a reasonable price?
3. Sort of related to last Q, is it because most people are using other instruments - Futures? CFDs? Would these be better recommended derivatives to options for those looking to make 1-few day trades to profit from market moves?
I am not interested in using leverage, but rather a well priced market with lots of volume.
Any other information is well appreciated,