How to Trade Options
Your step-by-step guide to trading options
Launch OptionsHouse (logon required)
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 OptionsHouse platform.
Fundamental company information
Similar to trading stocks, use fundamental indicators to help you to identify options opportunities.
Robust charting and analytics
Use embedded technical indicators and chart pattern recognition to help you decide which strike prices to choose.
Run reports on daily options volume or unusual activity and volatility to identify new opportunities.
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
Up, down, or sideways—there are options strategies for every kind of market.
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
Test your strategy
Before you place your trade, visualize and test your trading strategy on the OptionsHouse platform
using the Snapshot Analysis tool.
Use the Snapshot Analysis tool to visualize:
- Potential maximum profit
- Potential maximum loss
- Breakeven levels
- Earnings and dividend dates
Execute your trade
OptionsHouse 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 OptionsHouse platform, click by click.
If you ever need assistance, just call 800-387-2331 to speak with an Options Specialist.2
Create an exit plan
Most successful traders have a predefined exit strategy to lock in gains and minimize losses. This is an essential step in every options trading plan.
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:
- Determine concrete exit points for every trade with predetermined profit and loss targets
- Place stop loss orders to help manage downside risk
- Set up alerts to stay abreast of price changes
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 OptionsHouse platform, you can easily adjust, roll, or close an options position.
More resources to help you get started
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.