Welcome to Options 101, where we demystify the basics of trading options. In today’s video, we’ll guide you through a simple process of building an options trading watchlist. Whether you’re a beginner or looking to refine your approach, this step-by-step guide will help you curate a watchlist tailored to your trading preferences. For more in-depth learning, visit tradersfly.com, where a wealth of resources, including books, courses, and one-on-one sessions, awaits.
Step 1: Identifying Stocks with Weekly Options
Let’s start by using the Thinkorswim platform for this demonstration. Head to the Scan tab and select “public R and W.” Choose “search for weeklies” to filter stocks that trade weekly options. This step is crucial for ensuring liquidity and flexibility in your options trading.
Step 2: Setting Price Criteria
Next, set price criteria based on your preferences. You can filter stocks within a specific price range, such as $20 to $60 per share. Adjust these parameters to align with your trading strategy and risk tolerance. A narrower price range may be suitable for certain strategies like verticals or iron condors.
Step 3: Eliminating Low-Liquidity Stocks
To enhance the liquidity of your watchlist, add a volume filter. Aim for a minimum volume, such as one million shares traded, to ensure ample liquidity. Low liquidity can lead to wider bid-ask spreads and challenges in executing trades.
Fine-Tuning Your Watchlist
Manually comb through the resulting watchlist to eliminate stocks you’re not familiar with or those that don’t align with your trading style. Consider factors like bid-ask spreads, ease of borrowing (if you like to short), and overall understanding of the stock.
Saving Your Watchlist
Once you’ve refined your watchlist, save it for easy access. Use Thinkorswim’s functionality to save your watchlist under a customized name. This allows you to quickly retrieve and modify your curated list.
Advanced Tip: CBOE Most Active List
For additional insights, check the CBOE Most Active list. Visit the Chicago Board Options Exchange (CBOE) website and navigate to historical options data. By analyzing the most actively traded options, you gain valuable information about liquidity and popularity.
Final Thoughts and Resources
Building an options trading watchlist is a dynamic process that evolves with your experience and preferences. Regularly review and adjust your watchlist based on market conditions and your evolving trading strategy. Explore options further with the Options Jump Starting Course at tradingwebinars.co for a comprehensive understanding of options trading.
Conclusion: Empower Your Options Trading Journey
Armed with a carefully curated watchlist, you’re better equipped to navigate the world of options trading. The key lies in staying informed, adapting to market changes, and continuously refining your approach. Thank you for joining Options 101, and we look forward to seeing you in the next video. Happy trading!