If the option position is left unprotected, it's naked. Based on your answers, the broker typically assigns you an initial trading level based on the level of risk typically 1 to 5, with 1 being the lowest risk and 5 being the highest. This is your key to placing certain types of options trades. Screening should go both ways.

• Stock Options Trading | Online Options Trading Services?
• How to Trade Options in 4 Steps.
• pips calculation in forex.

The broker you choose to trade options with is your most important investing partner. Finding the broker that offers the tools, research, guidance and support you need is especially important for investors who are new to options trading. As a refresher, a call option is a contract that gives you the right, but not the obligation, to buy a stock at a predetermined price called the strike price within a certain time period. A put option gives you the right, but not the obligation, to sell shares at a stated price before the contract expires.

Depending on which direction you expect the underlying stock to move determines what type of options contract to take on:. If you think the stock price will move up: buy a call option, sell a put option. If you think the stock price will stay stable: sell a call option or sell a put option. If you think the stock price will go down: buy a put option, sell a call option. If the stock does indeed rise above the strike price, your option is in the money.

US to US Options Margin Requirements

If the stock drops below the strike price, your option is in the money. Option quotes, technically called an option chain or matrix, contain a range of available strike prices. The price you pay for an option, called the premium, has two components: intrinsic value and time value. Intrinsic value is the difference between the strike price and the share price, if the stock price is above the strike.

Time value is whatever is left, and factors in how volatile the stock is, the time to expiration and interest rates, among other elements. This leads us to the final choice you need to make before buying an options contract. Every options contract has an expiration period that indicates the last day you can exercise the option. Your choices are limited to the ones offered when you call up an option chain.

Access to extensive research.

Advanced mobile app. Commission-free stock, options and ETF trades. Cons Website can be difficult to navigate. TD Ameritrade. Pros Commission-free stock, ETF and options trades.

Summary of Best Options Trading Brokers and Platforms of April 2021

Free research. High-quality trading platforms. No account minimum. Good customer support. Cons No fractional shares. Promotion One free stock. Why we like it Robinhood is truly free: There are no hidden costs here.

Pros No account minimum. Streamlined interface. Cryptocurrency trading. Cons No retirement accounts.

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• The Advantage of trading options?

No mutual funds or bonds. Limited customer support. Why we like it Interactive Brokers' IBKR Lite is a strong option for frequent traders: The broker offers international trade capabilities, no stock-trading commission and a quality trading platform. Pros Large investment selection. Strong research and tools. Over 4, no-transaction-fee mutual funds. Cons Website is difficult to navigate. Trades of up to 10, shares are commission-free. Pros High-quality trading platforms.

Your Stock & Option Trading Experts | eOption

Comprehensive research. Commission-free stock, ETF and options trades. Call us at day or night. With features like Options Statistics, Options Probabilities, and the Analyze Tab, our 1 rated trading platform thinkorswim Desktop 1 and the thinkorswim Mobile App can help position you for options trading success.

We put the tools you need to make more informed options trading decisions, quickly and efficiently, all in one place. Refine your options strategy with our Options Statistics tool. Look at the put-call ratio to identify the potential direction of the underlying security. And use our Sizzle Index to help identify if option activity is unusually high or low. Weigh the potential risk of your trade against the potential reward using our Option Probabilities tool built right in the option chain.

Small trades: formula for a bite-size trading strategy. Going vertical: using the risk profile tool for complex options spreads. Options strategy basics: looking under the hood of covered calls. Home Investment Products Options.