TD Ameritrade Review for Options Trading 2018

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When we trade stocks, or futures or Forex contracts, we always need a plan for each trade. It includes an entry price, as well as a plan for how we will exit the trade. The exits include one or more profit targets, as well as a stop loss. Most option trades also require stops. There are a few exceptions — for example, a Straddle trade, which includes both a long put and a long call, is helped by price movement in either direction, and the more movement the better.

So it does not need stops. But straddles are one of a handful of exceptions. Most option trades do need them. Stops on options are not quite as straightforward as on how to trade options on thinkorswim options instruments. Many, if not most times, we need to base our stop-loss order not on the price of what we are trading the optionbut on the price of something else the underlying stock.

Furthermore, our option position might include multiple components, or legs; if so, our emergency exit orders need to unwind the whole position, not just one part. If the stop conditions are met, we might need to close out two, three, four or more separate options, and maybe a position in the underlying stock as well.

How do we do it? Two things are needed in the trading software. The first is Conditional order capability. Some brokers call these contingent ordersor something else. Tradestation, for example, calls them activation rules.

Think or Swim calls them order conditionswithin its Order Rules function. That is, when our stop condition is met stock price goes beyond our stop pricewe need to do not just one thing sell this optionbut several sell this option, and buy to cover that option, and sell this other one, and buy to cover that other one, etc.

Different trading how to trade options on thinkorswim options platforms approach this in a couple of different ways. In contrast to this approach, Tradestation uses the Order-Sends-Order functionality to do the same thing. When that is done, then sell to close my long put. The difference is that Tradestation can not combine the idea of an activation rule with the idea of a multi-legged order. It can do each of those things, but not together.

We get around this by basing a single order on an activation rule; and then using OSO to make that order send another order for another option, and so on until all legs are done. That takes a few more clicks, but is how to trade options on thinkorswim options difficult. Fortunately in both of these platforms, once you have queued up all the elements of the stop order, including the conditions based on the how to trade options on thinkorswim options, you can save and reuse the plan.

Now for a specific example. This involves owning an underlying stock, and selling a call option on that stock. This is a positon that really needs a stop — we own the stock, and if its price drops, we lose money.

If it drops beyond a certain point, we need to sell the stock. And if we sell the stock, we also need to buy back the short call. Most trading platforms will not allow you to enter a stop order on a stock if you have sold calls against it. I received a question about that from a reader this week.

I have sold covered calls against the stock. Tradestation will not allow me to enter a stop market order to sell the stock, since that would leave the short calls naked. How can I create a stop on this position? The trick is to use OSO to how to trade options on thinkorswim options an order to buy back the short call, and then have that order send a separate how to trade options on thinkorswim options to sell the stock. That second order will not fire until the call is bought back, so there is no problem with potentially naked short calls.

Here are the steps:. On the option chain, click on the particular call option that you have sold, to load its symbol into your order bar. Highlight the symbol in the order bar, right-click and select Copy. This is just to avoid having to type a long option symbol later. See below for what appears next:. Note that changing the symbol on this screen is quirky. You have to click in the Symbol field, type a character, backspace that character out, and then right-click and select Paste.

Do that in the Symbol field, pasting in the symbol for the call option. See next picture below. This should now look like the example below. Click OK in the Activation Rule window when done. If you do how to trade options on thinkorswim options it, you can later retrieve it from the Staged Orders tab of the Trademanager window and edit it and re-send it, if you need to. If you just click Place Order s without staging it, the system will try to send the orders; but if there are any errors you lose everything and have to start over.

This is how the covered call stop is accomplished in the Tradestation platform, For other trading platforms, the steps may be slightly different.

But it can be done in any platform, as long as there is the capability for conditional orders and also for Order-Sends-Order. For comments or questions on this article, contact me at rallen tradingacademy. Disclaimer This newsletter is written for educational purposes only. By no how to trade options on thinkorswim options do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever.

Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader.

The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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TD Ameritrade is one of the largest and most well-known online discount brokerages in the world. Acquiring thinkorswim, which catered mostly to active options and futures traders, was probably one of the smartest moves TD ever made. To get straight to the point, there is only one reason why traders like to trade options at TD Ameritrade…the thinkorswim platform. To stay more competitive, TD recently slashed its benchmark commission rate making it an even more appealing choice for active options traders.

There are over branches in more than 33 states in America, and TD Ameritrade employs more than 6, full-time employees.

In terms of funded client accounts, there are over 7. Needless to say, TD Ameritrade is a popular choice among retail investors and traders and the firm is not going anywhere. But what makes it so popular? Although almost all options brokers in offer stellar mobile and desktop trading platforms, thinkorswim is one of the highest rated platforms of all-time in the Google Play and Apple App stores.

It truly is the cream of the crop. Futures and Futures Options: Outgoing Domestic Wire Transfer: Why is it so high? Several brokers off it for free. What can we say? Professional options traders will see many similarities between the thinkorswim platform and the Silexx Obsidian platform, which is a favorite among market makers and derivative-based hedge funds. The thinkorswim platform has everything from advanced charts, options chains that load quickly, detailed position management tools, in depth analytics, a market calendar, and customizable watchlists.

Of course, standard things like font size, color, etc. Option chains on thinkorswim are a thing of beauty.

We have never experienced any delays in loading data that is typical with some option chains when scrolling up or down rapidly. Charting with TD Ameritrade is top-notch. The watchlist produced real-time quotes and market depth data for every symbol.

Watchlists are great because you can keep track of your current account positions as well as sort stock, futures, indices, and even individual options contracts by various metrics. Perhaps one of the more underrated of the thinkorswim platform is the ability to quickly find futures symbols, and therefore futures options symbols, very quickly. Some brokers like OptionsXpress have the absolute worst symbol finding feature you could possibly imagine. With thinkorswim, you can also see the tick size, tick value, and initial margin requirement all from one easy place in the platform!

Except for some of the options analytics tools, the mobile version of thinkorswim has everything that the desktop version has. It has more than everything you need to trade on the fly and manage your positions. Multi-leg options orders are not a problem. We also use it for market alerts. Level II trading data is free at TD Ameritrade for all futures and equities and their respective options.

Plus, there is a useful streaming market news feature on both the desktop and mobile platforms that is free of charge. A lot of traders have reported difficulty with approval for uncovered options trading with TD Ameritrade. It usually only takes an email to customer service to remedy this. Additionally, they offer excellent live-chat support via the mobile and desktop platforms. Once you start a support request, someone will typically answer within minutes.

As they saying goes, you get what you pay for. Although commissions with TD are negotiable, their rates are much higher than several other discount brokerages.

At the end of the day, you really have to ask yourself if advanced trading technology is worth paying more money in commissions. If that answer is yes, then TD is great. Options Bro March 16, The mobile option chain loads data points fast and accurately. Mobile order management is phenomenal.