How to trade options

Your step-by-step guide to trading options

Find an idea. Choose a strategy. Enter your order. Manage your position. We’ll help you build the confidence to start trading options on the E*TRADE web platform or our Power E*TRADE platform today.

Launch E*TRADE   Launch Power E*TRADE


Step 1 - Identify potential opportunities

Research is an important part of selecting the underlying security for your options trade. E*TRADE provides you with a rich collection of tools and information to help you research and analyze potential opportunities and find options investing ideas.

Fundamental company information and research

Similar to stocks, you can use fundamental indicators to identify options opportunities.

  • Find potential underlying stocks using our Stock Screener
  • Assess company fundamentals from the Snapshot, Fundamentals, and Earnings tabs. Read research reports from Morningstar, Thomson Reuters, Market Edge, and Trefis.1

Robust charting tools and technical analysis

Use our charts to examine price history and perform technical analysis to help you decide which strike prices to choose.


Step 2 - Build a trading strategy

It's important to have a clear outlook—what you believe the market may do and when—and a firm idea of what you hope to accomplish. Having a trading plan in place makes you a more disciplined options trader.

Explore options strategies

Up, down, or sideways—there are options strategies for every kind of market.

strategy optimizer tool

Strategy Optimizer

Use the Strategy Optimizer tool to quickly scan the market for potential strategy ideas based on your market outlook, target stock price, time frame, investment amount, and options approval level.

options chain

Options chains

Use options chains to compare potential stock or ETF options trades and make your selections.

  • See real-time price data for all available options
  • Consider using the options Greeks, such as delta and theta, to help your analysis
  • Implied volatility, open interest, and prevailing market sentiment are also factors to consider


Step 3 - Test your strategy

Before you place your trade, visualize and test your trading strategy using E*TRADE tools.

Options Analyzer

Use the Options Analyzer tool to see potential max profits and losses, break-even levels, and probabilities for your strategy. Watch our demo to see how it works.

options income backtester

Options Income Backtester

The Options Income Backtester tool enables you to view historical returns for income-focused options trades, as compared to owning the stock alone. Start with nine pre-defined strategies to get an overview, or run a custom backtest for any option you choose. Watch our platform demos to see how it works.

Options Income Finder

Use the Options Income Finder to screen for options income opportunities on stocks, a portfolio, or a watch list. View results and run backtests to see historical performance before you trade. Watch our platform demos to see how it works.


Step 4 - Enter your order

Select positions and create order tickets for market, limit, stop, or other orders, and more straight from our options chains. Ready to trade? Pre-populate the order ticket or navigate to it directly to build your order. Need some guidance? Help icons at each step provide assistance if needed.

Watch this brief 2-minute video to see how you can quickly and easily place options orders on the E*TRADE web platform, click by click.

If you ever need assistance, just call 800-387-2331 to speak with an Options Specialist.


Step 5 - Create an exit plan

Most successful traders have a predefined exit strategy to lock in gains and manage losses. This is an essential step in every options trading plan.

Weigh your market outlook and time horizon for how long you want to hold the position, determine your profit target and maximum acceptable loss, and help manage risk by:

  • Establishing concrete exit points for every trade with predetermined profit and stop-loss targets
  • Using alerts to stay informed of changes in the price of options and the underlying
  • Adopting one of our mobile apps so you can access the markets wherever you are


Step 6 - Adjust as needed, or close your position

Whether your position looks like a winner or a loser, having the ability to make adjustments from time to time gives you the power to optimize your trades.

options order ticket
portfolios page

Remember, just because there's an expiration date on an option doesn’t mean you have to hold it until it expires.

  • You can always choose to close your position any time before expiration
  • You can also easily modify an existing options position into a desired new position

How to do it: From the options trade ticket, use the Positions panel to add, close, or roll your positions. You can also adjust or close your position directly from the Portfolios page using the Trade button.


Step 1 - Identify potential opportunities

Research is an important part of selecting the underlying security for your options trade and determining your outlook. Start with some of the most widely used research tools on the Power E*TRADE platform.


Step 2 - Build a trading strategy

It’s important to have a clear idea of what you hope to accomplish. Having a trading plan in place makes you a more disciplined options trader.

choose your options strategy

Choose your options strategy

Up, down, or sideways–there are options strategies for every kind of market.

  • Get to know options strategies for bullish, bearish, volatile, and neutral market outlooks
  • Choose an options strategy that fits your market outlook, trading objective, and risk appetite
  • Check your options approval level and apply to upgrade if desired
select the strike price and expirate date in Power ETRADE

Select the strike price and expiration date

Your choice should be based on your projected target price and target date.

  • Use the options chain to see real-time streaming price data for all available options
  • Consider using the options Greeks, such as delta and theta, to help your analysis
  • Implied volatility, open interest, and prevailing market sentiment are also factors to consider


Step 3 - Test your strategy

Before placing your trade on the Power E*TRADE platform, visualize and test your trading strategy using the Snapshot Analysis tool or Paper Trading.2

Use the Snapshot Analysis tool and Paper Trading to visualize:

  • Potential maximum profit
  • Potential maximum loss
  • Breakeven levels
  • Earnings and dividend dates
  • Test drive your options strategies without putting real money at risk
paper trading in power etrade


Step 4 - Enter your order

Power E*TRADE gives you the flexibility to set up one-click trades from the options chain for faster order entry. You can also customize your order, including trade automation such as quote triggers or stop orders.

Watch this brief 3-minute video to learn how to quickly and easily place options orders on the Power E*TRADE platform, click by click.

If you ever need assistance, just call 800-387-2331 to speak with an Options Specialist.


Step 5 - Create an exit plan

Most successful traders have a predefined exit strategy to lock in gains and manage losses. This is an essential step in every options trading plan.

Set alerts in power etrade

Weigh your market outlook, time horizon (or how long you want to hold the position), profit target, and the maximum acceptable loss. Consider the following to help manage risk:

  • Establishing concrete exits by entering orders at your target and stop-loss price
  • Using alerts to stay informed of changes in the price of options and the underlying
  • Adopting one of our mobile apps so you can access the markets wherever you are


Step 6 - Adjust as needed, or close your position

Whether your position looks like a winner or a loser, having the ability to make adjustments from time to time gives you the power to optimize your trades.

Remember, just because there’s an expiration date on an option doesn’t mean you have to hold it until it expires.

  • You can always choose to close your position any time before expiration if you want
  • You can also easily modify an existing options position into a desired new position

How to do it: From the Positions page on the Power E*TRADE platform, you can easily adjust, roll, or close an options position.

covered calls in power etrade

More resources to help you get started

Boost your options knowledge

E*TRADE Knowledge has a wealth of on-demand resources for both new and experienced options traders. It's a great place to learn the basics and beyond.

Get specialized options trading support

Have questions or need help placing an options trade? Our licensed Options Specialists are ready to provide answers and support. Call them anytime at 800-387-2331.