Learning to buy options on thinkorswim is a must for the novice and experienced day trader. The TOS platform has many beneficial tools and lets you monitor the options market with ease. You can plan your strategy, and implement it in one convenient, easy-to-use, combined place free of charge. TD Ameritrade even offers a mobile option for buying options on the thinkorswim platform that allows you to trade from a smartphone, mobile device, or iPad. It is important to stick to a strategy that works; options traders tend to build a strategy based on either technical or fundamental analysis. Technical analysis focuses on market activity-generated statistics, such as past prices, volume, and many other variables. Charting and other similar technologies are used. Fundamental analysis focuses on measuring an investment’s value based on economic, financial, and Federal Reserve data. Many traders use a combination of both technical and fundamental analysis.
What is thinkorswim?
The thinkorswim platform also called TOS, is the trading platform for TD Ameritrade, a U.S.-based brokerage. The TOS software was first created by Tom Sosnoff and Scott Sheridan in 1999. The platform was quickly well esteemed and was attained by TD Ameritrade in 2009. TOS is an advanced trading platform, allowing you to trade almost any instrument. This includes stocks, options, ETFs, bonds, futures, and futures options. Besides trading, the platform lets you perform complex analyses on stocks and potential trades. TOS is available for Windows, Macs, and the web.
TOS gives you the option of logging into a live account where you can make trades using your own money. It also gives you the option to log into your paper trading account, which allows you to trade with fake money. Paper trading is used by traders to practice their strategy without having to risk their own capital. Your Cash deposits with TD Ameritrade are completely safe they are FDIC-insured, while brokerage funds are SIPC-insured for up to $500,000. TD Ameritrade has also obtained a supplement insurance plan from London insurers that provides an additional $149.5 million worth of protection for securities and $2 million for cash.
What Are Options?
A call option gives you the right, not the obligation; to buy a stock, and a put option gives you the right to sell the stock. If you believe the market is trending upwards, you would purchase a call option. If you felt the market was trending downwards, you would purchase, and put contracts. You would then sell your contracts to either follow your strategy or to minimize a loss. Trading options are best to think of it as the probabilities of future price movement. Day traders buy and sell shares of stocks within the same day.
Day trading is the activity of buying and selling stocks, bonds, options, futures, or commodities with the intent of profiting from price movements in the underlying security within a single trading day. Day traders rely on analyzing the movement of stocks on a chart rather than factors like products, industry, and management. The knowledge aids in knowing when to enter or exit the stock market. It also shows trends, which is helpful because previous days’ trends tend to repeat themselves. The main objective of a day trader is to take advantage of small price movements in highly liquid stocks. The more market volatility, the more favorable the conditions for a day trader.
Not all options carry the same risk; if you are the writer (seller) you have a different risk than if you are the holder (buyer). If you are a call holder and buy a call option, the upside potential is unlimited, and the downside potential is the premium that you spent. You want the price to go up a lot so that you can buy it at a lower price. If you are a put holder and buy a put, the upside potential is the difference between the share prices. You want the price to go down a lot, so you can sell it at a higher price.
If you are a call writer and sell a call, the upside potential is the premium for the option; the downside potential is unlimited. You want the price to stay about the same or even drop a little. So that whoever buys your call doesn’t force you to sell. If you are a put writer, and you sell a put, the upside potential is the premium for the option, The downside potential is the amount the stock is worth. You want the price to stay above the strike price, so the buyer doesn’t force you to sell at a higher price than the stock is worth.
Purchasing On the Platform
Before you can start day trading, it’s important to get the basics down, so you can be successful. Now that you understand the TOS platform that you will use, it is important to learn how to use it. To purchase options, you need to use a well-tested strategy that TOS will be there to guide you with the place to observe this strategy come to life. Trading short-term price movements means you need to use technical analysis and all the information available to you and decide where you think the market may move next. Your capability to process this information is important to get in at a good price. Having a strategy serves as a checklist that can help you analyze what you need to in a short period and keep your head in the game. When you don’t have something to refer to, it makes it more difficult and easier to get off track.
You need to decide on a number you are comfortable using to start options trading. A good rule of thumb is an amount that if lost will not hurt you in a distressing manner. You also need to have a stop loss number in mind. This is a number that you are comfortable losing when a trade is going against you, and you need to exit. Keep your trading size small, so if a few trades go against you, it doesn’t wipe out your account. Remember without capital you can’t enter into a trade, so you want to make sure you are making smart decisions.
Buy Options thinkorswim: Value
On TOS, you simply click on the SPY drop down and click on either a call or option; this is the option you will be trading for example purposes. Then under the green and red buttons labeled Join the Bid and Join the Ask, you will see QTY. QTY is the abbreviation for quantity, and you will select how many contracts you wish to purchase. Now you click on the Options tab, and it will open up a window with prices for calls and puts. You will see a section labeled “Strikes”. This section is typically set at four, I however like to set it to 14, so I can see more pricing.
You then click on either a call or put the lowest value, and you then go back to your main screen to purchase the call or put. Then you simply go down the price that is highlighter gray and look if the number to the left has the amount of contract available you are looking to purchase. You simply click on the left of the price to enter into the trade, and then you just watch it and follow your strategy. Once you feel it is time to sell, you click to the right of the price and sell. It sounds like a lot of steps, but once you practice paper trading, you’ll catch yourself doing this within seconds. It is important to practice these steps because time does not pause while it is waiting for you to enter into a trade. So, the price of the trade can go up; these are important things to keep in mind if you notice the number is different from when you were first on the options tab.
Summary: Buying Options thinkorswim
You have learned about TOS and what options trading entails. You have also seen how a strategy on the TOS platform is critical for your success as an options trader. Furthermore, you also saw how fast and easy to use, it is to purchase a call or put option. Sometimes people get overwhelmed because they don’t know what they are doing. Practice builds confidence, and you can only accomplish that on the trading platform. I believe everyone should have the opportunity to become their boss, plan out their entire day, and only work as much or as little as they want. I can teach you how to day trade like the top 10% without a complicated strategy or any technical indicators, even if you are a beginner.
My goal has always been to teach as many day traders to achieve their personal financial goals, whether they are novice traders or experienced traders. The MK VIP training has plenty of resources to help you get started on reaching your day trading goals. I teach the working class how to earn $10,000 a month through day trading. I help my students avoid the challenges I faced when I first became a day trader. As of now, MK Financial LLC is already the #1-day trading coaching business in the US in just one year. You are just a click away from learning what you need to become an options trader on the thinkorswim platform day trader with any amount of capital and take your life and salary to the next level.
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”
Leave a Reply