How To Place An Options Trade?

We'll go over the general steps needed to trade(buy and sell) options, which you can hopefully apply to the majority of brokerage sites.

Let's assume you're interested in buying a CALL option for Stock A for strike price $34, Expiration June 2013, that has the following option chain (Available at yahoo/google finance or brokerage sites. Search for company symbol and then click options).

Call Options - Expiration June 2013 (Expires on June 22, 2013)
Strike Price Symbol Direction Change Last BID ASK Delta VOL OPEN INT In/At/OutOfTheMoney Selected Option
30 stocka12xx Up 3.50 6.19 5.39 5.59 0.99 2 100 In the money
31 stocka12xx Up 2.94 4.83 4.49 4.69 0.90 2 23 In the money
32 stocka12xx 0.00 3.90 3.69 3.89 0.80 12 24 In the money
33 stocka12xx Up 1.58 3.10 2.99 3.19 0.70 2 5 In the money
34 stocka12xx Up 0.90 2.45 2.34 2.44 0.60 3 20 In the money Yes
35 stocka12xx Up 0.77 1.86 1.79 1.89 0.50 4048 45 At the money
36 stocka12xx Up 0.84 1.34 1.29 1.39 0.40 154 14 Out of the money
37 stocka12xx Up 0.50 1.04 0.89 1.00 0.30 18 274 Out of the money
38 stocka12xx Up 0.50 0.64 0.59 0.69 0.20 303 780 Out of the money
39 stocka12xx Up 0.44 0.44 0.39 0.49 0.10 109 244 Out of the money
40 stocka12xx Up 0.22 0.32 0.24 0.34 0.01 22 5317 Out of the money

Login to your brokerage account and click the Tab "Trade" and then "Options", if you see it, to get to the option trading section of the site

Opening a CALL option position using market order (buying the call option)

  • Select option "Buy to Open" to open a CALL option position
  • Enter the stock symbol (e.g. "aapl" for apple)
  • Enter Number of Contracts that you want to buy (For this you want to do a little calculation. Let's assume you have $1500 and the trading cost is $7 per trade with commission of $0.75 per contract. Since you're picking strike price 34 call option, multiply Ask price 2.44 by 100 to get price of 1 contract = $244. 1500/244 gives approx 6 contracts. This should still cover trading fees and commissions. If you're not sure, if 6 contracts will be within $1500, just go ahead and fill out the form and press ReviewOrder button without clicking the final submit order button and it'll inform you if your order costs more than $1500)
  • Select option "CALL" to place a call option
  • Select Expiration Date- June 2013
  • Select Strike Price $34 (We'll be using standard options and not mini-options so don't select strike price with the letter "M" in it)
  • Enter ContractType: Standard for regular options(as opposed to the new mini-options)
  • Select Order Type: Market
  • Select Duration(if available) per desired need. Choose Good until 4pm/End of the day if unsure. Check AON(All or none) if available
  • Click ReviewOrder and then click the Final Submit button to submit the options order

Closing a CALL option position using market order (selling the call option)

  • Select option "Sell to Close" to close the CALL option position
  • Enter in the Stock Symbol for which you bought the call option (e.g. "aapl" for apple)
  • Enter the Number of Contracts that you want to sell
  • Choose the option "Call" when choosing between Call or Put
  • Select the expiration date of the call option you currently have
  • Select the strike price of the call option you currently have
  • Select Order Type: Market
  • Select Duration(if available) per desired need. Choose Good until 4pm/End of the day if unsure. Check AON(All or none) if available
  • Click ReviewOrder and then click the Final Submit button to submit the options order

Note: Some brokerages might simplify the process and present you with your existing option in a dropdown list to select from instead of having you manually type in the option details such as expiration and strike price

In the above examples we used market orders for simplicity. The option price you get for the order should not be significantly different.




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