RESEARCH – DO YOUR HOMEWORK !

Copy of canstockphoto6492569

Recommended:

Two brokerage accounts (there is no minimum funding required
to open either account)

1. For underlying stock RESEARCH — Use TD Ameritrade
trading platform:

http://www.tdameritrade.com

….Underlying stock information is extensive and easy to use

….High commissions: per contract, (open $6.95 and close $6.95)
Regulatory fees: 75¢ per contract (spread, 2 legs = $1.50 open, $1.50 close)
Total spread: Open $6.95 + $1.50. Plus, Close $6.95 + $1.50 = $16.90.

 

 

2. To OPEN and CLOSE Spread Orders – Use TastyWorks trading platform
http://www.tastyworks.com

….Specializes in options and option information is extensive

….Option trade commissions are low:
$1.00 per contract to open — $0 commission to close all contracts
Maximum commissions on opening is $10.00 per contract
Regulatory fees: 13.8¢ per contract
Total spread: Open $2.00 + $2.76 —Close $0 + $2.76.

TDAmeritrade has a Paper Money feature to test strategies.
TastyWorks does not have a Paper Money feature

WHERE DO I START?

Canstock start race

1. Do RESEARCH for underlying stock on TDAmeritrade trading platform:
http://www.tdameritrade.com

2. Enter stock symbol in “Symbol lookup” (upper right)

3. Click on “Company Profile”

4. Click on “News”

5. Click on “Charts”
TDAMERITRADE Sample Stock Chart

Handout 1B

6. Fill out Analysis Templates: (See below)

You must have a detailed step-by-step analysis
to select an underlying stock worthy of an option order.

 

 

OPEN and CLOSE ORDERS on TASTYWORKS trading platform

TASTYWORKS HAS 3 TRADING PLATFORMS:

1. Desktop (Windows device)
2. Web Browser (ios Device) (I-pad)
3. Mobile App (Cell phone) (Apple app Store, or
(Google Play Store)

1. DESKTOP – TastyWorks main trading platform –
A stand alone Windows device application. It
can be downloaded by going to TastyWorks site
Click on “Technology” tab (The trading platform
will have a black screen.)

2. WEB BROWSER – TastyWorks web browser trading platform –
accessed by using a web browser (i.e.Google)
This platform can be used as your backup
if you are working away from your Desktop.

3. MOBILE APP – TastyWorks Mobile App trading platform –
Those of you on-the-go can visit
Tastyworks on your Android (Play Store)
or iOS (Apple Store) to download.

How to Navigate WEB BROWSER Trading Platform:

Handout 3

A. Click on “Trading Platform”

B. Insert Stock symbol – Enter

C. Click on “Strategies” (drop down)–

D. Choose “Vertical” and “Long Call Vertical” – GO

E. Click on “Table” (option chain comes up)

F. Choose Expiration Date

G. Strategy confirmation (upper right)

 

 

STEP-BY-STEP ANALYSIS TEMPLATES

 

Bull Call Strategy Template

Fill out each blank of the following template for guidance in
selecting an underlying stock and Bull Call Spread options:
WANT STOCK TO GO UP:

DEBIT:

Bull Call Spread a/k/a Debit Call Spread or
Long Call Vertical             DATE:______________

Stock_________Symbol____Print Profile:__
Important news about stock?_____

Chart: Need Hi/Lo “zig-zag”:___3 low in 1 yr: $___ High$___
Stock price today: Low:_____High:_____

*Bid/Ask____/____$or¢ Between____(low = high liquidity)
**B/A Size:____/____(Need large)

OPTION CHAIN: Expiration Date:_________# of days___
Volume #_______Open Interest #_______Hi-Lite In-the-money:____

Prepare to place your order – Stock Price $_______

(Both Strike Prices in-the-money BELOW stock price)
#1. Sell (bid) CALL – One strike price in-the-money BELOW stock price
= $_______ : premium @ _____¢

#2. Buy(ask) CALL – One strike price in-the-money LOWER than #1
= $_______ : premium @_____¢

(Want Stock Price to Increase – to pass both Strike Prices at expiration, in-the-money)

 

Question #1: How do you calculate a option’s Volume and Open Interest?
A.___Multiply the premium by 100
B.___Both shown on Option Chain
C.___Subtract the strike prices from each other
D.___Call a broker

 

*Bid/Ask spread is the difference between the total bid(sell) prices
paid, and the total ask(buy) prices sold of an underlying stock.
It is the profit a broker makes for you to enter a trade (your transaction cost). The thinner the spread, the cheaper to open the trade
Example: Bid/Ask: 136,298 / 136,301

Question #2:  What is spread of the above Bid/Ask:
A. ___ $300
B. ___$3

 

**B/A Size represents the amount of all stock that is available
to immediately buy or sell at a specified price.
Example: 300 X 1,000 means there are 300 shares bid(sell) to sell and
1,000 shares offered to buy(ask).

Question #3: If B/A Size is 1200 X 500, there are:
A.___there are 1200 shares to buy
B.___there are 1200 shares to sell
C.___there are 1700 shares to buy
D.___there are 136,298 shares unaccounted for.

Answers: #1: B –#2: B — #3: B

 

BEAR PUT STRATEGY TEMPLATE

Fill out each blank of the following template for guidance in
selecting an underlying stock and Bear Put Spread option:
WANT STOCK TO GO DOWN:

DEBIT:

Bear Put Spread a/k/a Debit Put Spread or
Long Put Vertical
Date:_______________
Stock_________Symbol____Print Profile:__
Important news about stock?_____

Chart: Need Hi/Lo “zig-zag”:___3 low in 1 yr: $___ High$___
Stock price today: Low:_____High:_____
*Bid/Ask____/____$or¢ Between____(low = high liquidity)
**B/A Size:____/____(Need large)

OPTION CHAIN: Expiration Date:_________# of days___
Volume #__________Open Interest #___________

Prepare to place your order – Stock Price $_______

Both Strike Prices Out-of-the-money (in white) BELOW stock price.

#1. Buy(ask) PUT – One strike price out-of-the-money BELOW stock price
= $_______: Premium @_____¢
#2.Sell(bid) PUT – One strike price out-of-the-money LOWER than #1
= $_____:Premium @______¢

(Want STOCK PRICE to be below both in-the-money strike
prices at expiration.)

*Bid/Ask spread is the difference between the total bid(sell) prices
paid, and the total ask(buy) prices sold of an underlying stock.
It is the profit a broker makes for you to enter a trade
(your transaction cost). The thinner the spread, the cheaper to open the trade
Example: Bid/Ask: 136,298/136,301

**B/A Size represents the amount of all stock that is available
to immediately buy or sell at a specified price.
Example: 300 X 1,000 means there are 300 shares bid(sell) for and
1,000 shares offered to buy(ask).

 

Question #4: Open Interest is:
A.___the time the Market opens.
B.___the number of contracts exchanged
C.___the number of contracts that exist
D.___the transparency of the option market

Answers: #4: C

 

 

Please scroll way down to: “How to Open a Vertical Spread Order”

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