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What Is Options Swing Trading? Get Answers

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Written by Timothy Sykes
Updated 4/21/2023 12 min read

Options swing trading is a strategy for active options trading. Like stock swing trading, it fits the kind of active investor who works on a slightly longer timeframe…

Swing trading is still bound by the rules I teach. Unlike the “hold and hope” non-strategy, swing trading is a form of active trading, with risk and a profit goal built in.

I’m more of a day trader, but many of my students have successfully applied my rules to swing trading. Here I’ll cover how to apply this strategy to options trading, its pros and cons, what indicators to look for, and more.

Let’s dive in!

What Is Options Swing Trading?

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Options swing trading is a strategy where you take advantage of short-term price moves. The timeframe you trade on can be anywhere from a few days to a few weeks.

This method is called “swing” trading because you’re profiting from price swings. You also take advantage of financial market movements.

Swing trading can be less stressful than day trading. Day trades are measured in minutes or hours, and can go from profit to loss if you don’t act quickly enough.

Are you learning the basics of options trading? Check out my guides on options margin, strike prices, and spread option trading.

How Does Swing Trading Differ From Day Trading?

Besides the obvious differences in timeframe, swing trading is different from day trading in its approach. Day traders look for small price movements within a single trading day. Swing traders look for larger price movement over several days or weeks.

The different timeframes can have different risks. Day traders are usually attracted to volatile stocks — they give the greatest possibility for short-term gains. But they can also go against reckless traders quickly.

Swing traders often target slower price moves, which take a longer time to play out. But nothing is guaranteed in the market. Taking your eyes off a stock is a good way to find yourself in a bad situation.

How to Swing Trade Options

Considering getting into options swing trading? Here’s a step-by-step guide to implementing swing trading strategies for options:

  1. Check the chart. If you see a multi-week breakout in the chart, it might be a good candidate for an options swing trade.
  2. Build a trading plan. This should contain your risk and profit objectives.
  3. Enter your options trade. Depending on your strategy, this can go 1,000 different ways. But the main idea is that you want to translate your trading plan to things like strike price and expiration date.
  4. Consider your options. You can trade the option to lock in profits or limit losses. You can also revise your risk, if the underlying asset is trending up (or down for puts) and you want to let the move play out before cashing in.
  5. Log your results in your trading journal. A great swing trading strategy is always being fine-tuned. Your strategy is only as good as your record says it is.

The best options broker doesn’t get in the way of your trading. Check out my list of the best options brokers for most traders.

Pros of Options Swing Trades

Options swing trading is a great alternative if you can’t commit to day trading. Here are some of the pros of options swing trades:

Needs Less Trading Time

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Day traders can spend hours and hours watching charts throughout the day. But this doesn’t fit into everyone’s schedule. Some swing traders hold assets for days or even weeks, and manage to become profitable without turning trading into a 9-to-5 job.

Doesn’t Sacrifice Short-Term Profit

Like day trading, some swing strategies target short-term price movements. For some traders, this is a good compromise between ultra-active trading and slower-paced swing trading strategies.

Cuts the Noise Out of Trading

Volatility can be both a blessing and a curse for traders. Short-term volatility can result in traders blowing through their stops. By targeting longer timeframes and having more forgiving risk, you can allow moves to play out while ignoring volatility blips.

Cons of Option Swing Trades

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On the flip side, swing trading can have some drawbacks. Here are some of them:

Exposes You to Price Gaps

Swing traders typically hold positions across multiple days. This might expose you to overnight and weekend price gaps.

Price gaps are when an asset opens at a vastly different price than the previous day. This can happen because of newsworthy events happening outside trading hours, as well as market sentiment.

For the penny stocks I like to trade, this can be a big risk.

Lulls You into a False Sense of Security

Just because your trading plan has a longer timeframe doesn’t mean the markets will cooperate! Any time the markets are open, you have to be paying attention.

Example of Options Swing Trades

What does an options swing trade look like in action? Here’s an illustration:

Let’s say Company A’s current stock price is $8.50 per share. But Company A’s industry is in a long-term downtrend.

You buy put options with a $6.50 strike price that expire a month from now. These puts are far out of the money, so their premium is cheap — just 20 cents. That comes out to $20 for the contract, with a potential profit of $180 if it hits the strike price.

The early results look good. Company A’s stock price plummets to $6.75 the next week. Prices haven’t reached the strike price yet, so you can’t exercise your contracts. But the premium on your option has soared to $1.60.

You don’t have to exercise the contracts to profit. You can just sell the contract and receive the new premium, earning a profit of $140 minus fees.

What Is a Good Delta for Swing Trading Options?

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A good delta for swing trading options depends on your strategy.

Options with higher delta values are more expensive. They build more value as the underlying stock moves, because they’re more likely to expire in the money.

Options with lower delta values are less likely to expire in the money. This makes for a lower premium.

Just like in most trading considerations, there’s no easy answer here. Whatever delta you target in the options you trade, make sure it’s consistent with your strategy. 

Liquidity is also important. The option will have to be liquid enough to ensure there are buyers and sellers to partner with on your trades.

Choosing Expiration and Strike Price

Expiration and strike price are two of the most important elements of your options contract. How do you set them? It’s all part of a good trading plan.

Check out my guide to building a trading plan here.

A shorter time until expiration means you won’t have much time for the asset to change price. Out-of-the-money trades will have less of a chance of hitting their strike prices, while in-the-money trades will have a higher premium.

Something to remember is that options also have time value. This is like an adaptive expiration, affecting the value of the option as it gets closer to expiration.

You should consider implied volatility, liquidity, and market conditions when setting a strike price. High implied volatility options will cost more the closer they are to their strike price. That’s because a volatility blip can be enough to make them executable.

Which Indicator Is Best for Swing Trading?

These three technical indicators are often used in swing trading:

  • Bollinger Bands: This swing trading indicator measures an asset’s volatility. The bands expand when volatility increases and contract when volatility decreases.
  • Relative Strength Index (RSI): This indicator measures whether an asset is oversold or overbought. RSI ranges from 0 to 100. Anything under 30 means the asset is oversold, while anything over 70 means it’s overbought.
  • Put-Call Ratio (PCR): This ratio calculates option trading volume by dividing the open interest of puts by that of calls. A PCR above 1 indicates a bearish market because there are more puts than calls. A PCR under 1 indicates a bullish market because there are more calls than puts.

What Percentage of Options Traders Are Successful?

tim sykes and mark croock selfie in 2023
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Only a small percentage of options traders are successful. I’m not gonna sugarcoat it — trading is one of the hardest things you’ll ever learn, and not everybody will succeed.

There’s great risk in trading. A 2019 study called “Day Trading for a Living?” looked at the success rates of Brazilian futures traders over a 2-year window, and found that 97% of traders with more than 300 days actively trading lost money. Only 1.1% earned more than the Brazilian minimum wage ($16 USD per day).

This was futures, not standard options. Maybe you don’t intend to be that active of a trader … but you get the point.

I’m not saying you can’t succeed. You can succeed, but it takes time and commitment. So, study hard and learn from each trade. The key to successful options trading is building your skills every day.

How do you know if your options trades are successful? Here’s a guide to calculating options trading profits.

What Is the Safest Options Trading Strategy?

There’s no “safest” options trading strategy — every trading strategy has various levels of risk. But selling covered calls and cash-covered puts are some of the least risky strategies. They don’t expose you to the unlimited risk of some higher-level options strategies.

Why Do Most Swing Traders Fail?

Most swing traders fail because they don’t take it seriously. Many of them treat trading like gambling and don’t do their research. They don’t have a plan, and make random trades.

The key to making any style of trading work is discipline. Discipline is what makes you commit to your trading plan, instead of falling in love with a winning trade or holding it past your risk on a losing one. Discipline is what keeps you tracking your trades, and adjusting your strategy as necessary.

Options Swing Trading Best Practices

Every trader has different goals and strategies, but some tips benefit everyone. Here are several best practices to follow when swing trading options:

  • Cut losses quickly. Even if you’re swing trading, this is always rule #1.
  • Keep track of your trades. You can’t be an absent trader and hope to profit.
  • Maintain alerts. These can help you monitor your trades even when you’re not watching a screen.

Key Takeaways

Options swing trading is an alternative to day trading that fits the lifestyle and temperament of some traders. In swing trading, you typically hold onto positions for multiple days to take advantage of price swings.

It fits some traders really well. Some have high blood pressure and don’t want to deal with the stress of day trading. Some have full-time jobs or live in other time zones and can’t watch the markets all day.

There’s a flip side to these advantages though — some swing traders treat the strategy as a “set-it-and-forget-it” solution to making money. A cousin of “get rich quick,” this approach never works. Whatever trading strategy works best for you, trading success will require working harder than you ever have.

Becoming a successful swing trader means studying hard to build trading experience. You don’t have to do it alone, either.

I recommend getting some expert guidance. In the options world, I think there’s no better mentor than my former student Mark Croock.

Mark has racked up $4 million in career earnings, mostly from trading options. He’s done this by adapting my penny stock trading strategies to options. Before he was a teacher, he was one of my best students — watching every single webinar in the Trading Challenge 2 or 3 times!

Now he’s got his own mentorship program, called the Evolved Trader. Check it out for strategy sessions, trade alerts, a great chat room, and more!

What do you think of options swing trading? Do you have some tips to share? Let me know in the comments!

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”