Many TradeStops members trade options regularly, and many more are beginning to learn how to trade options. How can TradeStops help?
As option trading becomes more popular, the TradeStops team wants to help you understand what you can expect from TradeStops to help you manage your options trades.
Keep in mind that options are derivatives of an underlying stock or ETF. The price of an option is at least partly based on the price of the underlying stock. Also, every option will expire on a pre-determined date and will then cease trading.
Most options have a life-span of less than one year. Because of this, it’s impossible to determine a Volatility Quotient for the options. Even if we could determine a VQ for options, this number would be meaningless as the option will ultimately expire.
For our first example, let’s look at how to track an out-of-the-money call on Apple Inc (AAPL). AAPL traded recently at $140 per share. Someone bullish on AAPL might think that the stock can continue trading at all-time highs and move up to $150 per share in the next 6 months.
As with many investment strategies, we recommend that you set up a separate portfolio to track the options. You’ll notice that we’ve included the underlying stock in the portfolio in addition to the option.
We’ll set up a trailing stop alert to trigger if AAPL drops 8.65% from this point in time.
Next week, we’ll focus on setting up alerts for covered calls and naked puts. If you have any questions, please contact our Customer Success team.
Education Director, TradeStops