The options market provides a wide array of choices for the trader. Like many derivatives, options also give you plenty of leverage, allowing you to speculate with less capital. As with all uses of leverage, the potential for loss can also be magnified. Explore the information and resources below to learn how to trade options.
A long option is a contract that gives the buyer the right to buy or sell the underlying security or commodity at a specific date and price.
When the buyer of a long option exercises the contract, the seller of a short option is "assigned", and is obligated to act. After three months, you have the money and buy the clock at that price. If you understand this concept as it applies to securities and commodities, you can see how advantageous it might be to trade options. For a relatively small amount of capital, you can enter into options contracts that give you the right to buy or sell investments at a set price at a future date, no matter what the price of the underlying security is today.
Some things to consider before trading options:. Control a large investment with a relatively small amount of money. Options allow you to speculate in the market in a variety of ways, and use a number of creative strategies.
There are a wide variety of option contracts available to trade for many underlying securities, such as stocks, indexes, and even futures contracts.
If you have an existing position in a commodity or stock, you can use option contracts to lock in unrealized gains or minimize a loss with less initial capital. You can trade and invest in options at TD Ameritrade with several account types. You will also need to apply for, and be approved for, margin and option privileges in your account.
Trade Architect , and thinkorswim. Trade Architect is ideal for those traders first starting with options. The thinkorswim platform is for more advanced options traders.
It features elite tools and lets you monitor the options market, plan your strategy, and implement it in one convenient, easy-to-use, integrated place. In addition, TD Ameritrade has mobile trading technology, allowing you to not only monitor and manage your options, but trade contracts right from your smartphone, mobile device, or iPad.
Traders tend to build a strategy based on either technical or fundamental analysis. Technical analysis is focused on statistics generated by market activity, such as past prices, volume, and many other variables. Charting and other similar technologies are used. Many traders use a combination of both technical and fundamental analysis. Whether you use technical or fundamental analysis, or a hybrid of both, there are three core variables that drive options pricing to keep in mind as you develop a strategy:.
In addition, you can explore a variety of tools to help you formulate an options trading strategy that works for you. For veteran traders, thinkorswim , has a nearly endless amount of features and capabilities that will help build your knowledge and options trading skills.
See what sets us apart from the rest with our top 6 reasons to choose TD Ameritrade. Discover how to trade options in a speculative market Learn the basics and explore potential new opportunities on how to trade options The options market provides a wide array of choices for the trader.
Options New Investor Get Started Explore the information and resources below to learn how to trade options. Understanding the Basics A long option is a contract that gives the buyer the right to buy or sell the underlying security or commodity at a specific date and price. Trading Options Some things to consider before trading options: Whether you use technical or fundamental analysis, or a hybrid of both, there are three core variables that drive options pricing to keep in mind as you develop a strategy:More...