Fastest Way To Trade Options using ThinkorSwim Active Trader

Welcome back to another video, everyone. So in this video, I'm going to break down how to buy or sell options using Active Trader. Now, first and foremost, right now the market is closed, so I won't be able to buy or sell right now. So what I'm gonna do is I'm gonna go on the On Demand feature, which once again is going to allow me to go back in time to actually buy or sell a stock or any other security that I want, right? So if I go on the On Demand feature, once again, it's taking me to whatever date I'm looking for. Let's say I go to October 9th. So at this point, I'm on October 9th, 10:19am that's the only thing I see. I see everything until October 9, 10:19am and what I'm going to do is I'm going to jump to Stock Roku. Now, as I jump to Stock Roku, it's automatically going to show me everything right here for Stock Roku. So I'm going to create a full setup on buying options, calls or puts. Right. Now, typically when people are buying options, they go to trade. When you go to the trade tab, tab up here, you get the full option chain, right? You get the full option chain right here. Now, when you get the full option chain here, you're able to look at what option you want to buy, depending on the expiration date, if you want to buy a call or a put. So if I go on October 11th, right, this is the options that are expiring on October 11th. Now, obviously, on the left side, I have my calls, and on the right side I have my puts. Once again, calls. If I'm buying calls, I'm making an assumption that the stock price will go up. If I'm buying puts, I'm making an assumption that the stock's price will go down. On calls, I make money when the stock goes up on puts, I make money when the stock goes down. Down. Okay? So this is what people usually use to buy options if they want to buy calls. Sell calls, Buy puts. Sell puts. Now, also over here, there's a lot of other factors you have to consider when you're buying options, right, or even selling options. There's a lot of things you have to consider, right? When you look at the options chain. Once again, this is the option chain. Now right here we have the strike price, what price we are looking to execute the contract at. Are we looking to buy calls? Are we looking to buy puts? And what price are we anticipating the stock to go towards.

So we can purchase the contract around that price point, right? So now let's just say for argument's sake, stock Roku is trading at 113. We think it's going to go higher. I'm going to make another video showcasing where to pick your strike price, where to put what, what expiration to pick, depending on your trading type, all that, I'm going to make another video. But for now, let's just focus on the basics of calls and puts and the strike price. So the stock's at 114 and I think it's going to go higher. So I buy. Let's say I want to buy the 120 calls or not even the 120 calls. I want to buy the 115 calls. Okay? Now if I want to buy the 115 calls, this is where I would typically buy. And this is where people usually typical typically use to buy or sell options. Now instead of me using this, what I'm going to use, I'm going to use the Active Trader tab on the platform. So how are we going to set up the Active trader? So let me help you set it up. So basically, if we want to set it up, this is what we do. So, so we are going to go to our active trader. And this right here will allow you to buy or sell that option chain. So this is the setup I personally like to use when I'm buying or selling options. So basically I go up here and I create two boxes. So in the first section I have the stock. So I'm looking at stock Roku, right? And this is not my exact setup. I will share my exact setup in the upcoming videos. So, so you guys can see how I have my full layout, where I have my screens, where I have my options chain, where I have my Active trader, and what stocks or what ideas I'm looking for the day, right? So right here I have Roku. The stock I have stock Roku. What I would put in this section is here I would put the option I am looking to trade. So if I'm looking to trade the 115 calls for Roku, I. I would put the calls here. So what I would do is I would link this to, let's say two. Now if I link this to two, all I have to do is go to the option chain, go to the 115 calls, right click and hit send to 2. Right? If I send to 2.

What'S presented here is the option chain, the option for that price. So what I do when I have the Option up. I take the chart off. I just have my active trader and level two up. That's the only two things I have up. So right here I am looking at Roku weekly calls at $115 expiration for this Friday. So this is going to show me the premium for just this contract. It is going to show me that for Roku, Roku's contract expiring this Friday on October 11th. I'm looking at $115 calls. Now. Right here I have the bid side. Right here I have the ask side. Bid side once again represents where people want to buy. The ask side represents where people want to sell. So what I'm going to do first is, is I'm gonna set up my active trader. So how am I gonna set up my active trader? I'm gonna go to my settings right here. If I go to my settings, I'm going to get an open screen that looks like this. So what I'm going to do next is on second line, I'm going to move up quantity with buttons above second line and I'm going to move auto send on or off above second line. Once I do that and I hit okay, I get the following things presented right now. Another thing you guys can do is you guys can hit. You guys can hit buy ask, buy the bid. You know, you can set up all these things. So let's say I have buy ask or buy bid. And you want to set up other orders, you can too. But this is how I personally like to have it up. So let's say I want to buy Roku's 115 contract. Can use all of this to buy it. Now before I jump into that, another thing I want to break down is if you want to change the contract, let's say I want to change. I want to change the call to a put. All you do is where it says C. You erase that right? And you put P. Boom. It's a put. Now if I want to change the premium from 115 to 110, I go 110. 115. Boom. You can see I'm looking at Roku 100 weekly's puts for October 9, October 11, 2019. Now if I want to change the puts to 115, I can put it to 115 and it's at 115. For now, I'm just going to change it to calls, right? Let's just say I think Roku is going to go up right now. Depending on what your option strategy is, depending on how you're playing it, if you're scalping, a little bit different, if you're playing it for the long run, a little bit different. So there's a lot of other factors you have to look into besides just the premium. But obviously right now we're just going to focus on the basics and take it from there. So right now let's say I want to buy five contracts of Roku. So first and foremost what I do is I want my quantity to be five. So when I make my quantity five, whatever I look to buy or sell, it's going to be at 5. Now second, as I mentioned before, we have something called the auto send button. If you're someone who's looking for very fast execution speeds, auto send would be very, very effective. Why? Because if you don't have auto send on and let's say I hit buy market, it's going to ask me for a confirmation. But let's say I have my auto send on and I hit buy market, it's not gonna ask me for confirmation. That's number one. Number two, like I mentioned before, when you're buying options, I do not recommend you using Buy Market or Sell market. Why? Because market makers, they always mess around with the orders. So, for example, right now you might say, well, if I buy market, I might get it at 255. But what you have to understand the way market makers work is the moment you put buy five at 255 or 260 and you use a market, the moment this order goes through the market makers sometimes are gonna move this from 260 to maybe 276. So you end up paying a much higher premium than you actually would. Because the market maker's computers are extremely fast. So your order processes and their bid and ask changes in like a millisecond. Which is why if you've traded options before, you've noticed that the minute you get in, boom, you're down already because you're using Buy Market or sell market, right? So what we're gonna do is instead of using Buy Market or Sell market, we can buy or sell from here. So right now the sellers are at 274. The buyers are at 270. If I really, really want to get in this stock in this option right now, I can just hit the ask. What I mean by that is I go to 274 right here and I hit buy five limit. Boom. Sent.

All right, so what I'm going to do here is I'm going to buy using the Active trader instead of buying market or selling market. Now on on the on demand feature, it's going to lag a little bit. So it might not be perfect. But I promise when you use it on a real account or even paper trading, it's going to be a little bit more effective. So basically let's say I want to buy this stock right right now. It's gonna show me where the sellers are and where the buyers are. So you can see at 289 we have people selling right at 286 and 290. See it's kind of messed up a little bit is where people are looking to buy. One way I can buy is I can hit buy market, right? Another way I can buy is I can use this section right here to buy. So basically 295 is where the sellers are. So if I really want to get in, I can go on 295 and hit buy limit. Once I hit buy limit, boom. I got filled at 295. I hit the ask instead of hitting buy market. Why? Because on a real account this is not gonna happen on paper trading or on demand. If I hit buy market, sometimes what the market makers are gonna do is they won't let me get it for 295. They see a market order coming in and they're like, okay, this person is willing to buy at market. We are looking to sell at 295. Why would I sell it to him or her for 295 when they are placing a market order willing to buy at any price? Move this, put $3. Now instead of you getting filled for 2.95 what their first ask price was, you get it for $3. Because they have super quick systems and computers which are programmed to actually fluctuate based on these algos, right? So that's one thing. So make sure you're using a limit order. Next, when you get into an option trade with.

Active trader, the great thing is you don't see your P and L. I think that's a great thing especially for a lot of people that panic seeing the P and L. But now the second question people have is, all right, I don't see my P and L. That's okay. But how do I know how many contracts do I have? Right here you have net position five. You can see I have five contracts. Now if I go to my monitor tab, you can see I own five contracts. First stock, Roku 115 call. 295 is my trade price. The stock is currently at 293, I'm down $7.50. Now let's just say I want to exit. If I want to exit, I can either hit the mid price. Like instead of me hitting, hitting it right at 294, I would say let me try 297. Because sometimes what happens with market makers is they might want to buy a 294 and sell at 3. But if you put in a price known as mid price, let's say I go to 296, they might fill your order at 296. Right? Because remember, a lot of times you're trading against market makers, not real humans. They're the ones moving prices back and forth. So I might try 296. It's not filling. Now let's say I really, really want to fill and the stock looks like it's going down. I might say, you know what? Screw 296, 294 and get out. Right? And it, it's going to allow me to immediately get in or out of the stock price. Now obviously this isn't working right now because like I mentioned before, we're on the on demand feature. And sometimes the on demand feature lags and messes up. But on a real account that order would go through immediately. Right. Let me see if I can change it. Exit out. Let's say we go back to 295. Yeah, see on the on demand feature, it's kind of messing up. It tried market. I got out at 289. Okay, but if you guys see that's the concept of using active trader on options right? Now let's say I'm trading another stock, right? You can always change this. One way to change it is you can just change it writing it out or you can go to monitor. And let's say you want to trade, you go to trade and let's say you want to trade Apple's.

Contract, Apple's option. So you go to stock Apple. You're like, ah, I want to buy puts. Same thing. You go to trade, you go to Apple. I want to buy the 225 puts. I go to 225. I look at puts once again. Puts mean that the stock's price is going to go down or anticipating it's going to go down. 225 puts, right click send to two. And I have, if you guys see right here, the 225 puts for stock Apple contract expiring this Friday. Same concept. Have the buyers and the sellers for the puts. Remember if the stock's price goes down, my premium goes up. So all I have to do here, I have to buy puts. So let's say I want to buy 50. If I want to buy 50. And just keep this in mind, if you're ever buying a lot of contracts, especially 50, 100, 200, 300, please do not use a market order. Now, even if you're buying 200 or 300 contracts, which I have done in the past, and I've noticed something. When you buy a lot of size, do not go in all at once. Like, if you're buying, let's say, 200 contracts of apple right now, go in 50, 50, 50, 50. Or go in 100 or 100. Right. Cut it down a little bit. Do not go in with big size right off the bat. But if you're trading 10 contracts, five contracts, that's totally fine. So in this situation, what I'm gonna do is I'm gonna buy. Let's say I want to buy 50 at 164. You can see people are selling at 164. So I go, boom. I got 50 in 164 immediately. Now, if I use market order, what market makers would do, sometimes instead of me getting it for 164, I might get it for 167. And obviously, those 3 cents are huge, especially if you're trading options with a lot of size. So that's why using a limit order is very, very effective. Now, let's say I want to put a stop. Can I put a stop? Yes, I can put a stop. You can see at 150, 153, I have a stop. I don't really recommend using stops for options just because the market makers fluctuate the price up or down, especially on options that don't have a lot of volume. If there's volume, cool. Maybe sometimes it'll work. But in this situation, if there's no volume, it'll make it very, very hard. Market makers will stop you out. You can see, I bought puts. I bought 50 contracts. You go to your monitor, you can see we are up $100 right now on this trade. Why? Because buying puts is basically, we are anticipating that the stock's price is going to go down. And as the stock's price goes down, our premiums go up. We own 50 contracts. Let's say I want to sell it. I own 50 contracts at 164. Let's just say I want to sell at 169, or whatever the case is. I go here, boom, 169amount $250 immediate execution. That's the whole idea of using active trader for options. Me personally, I think it's a lot faster and quicker and it's especially very effective. I just think using the options chain, which is something a lot of people use, setting up your order, getting it ready and and doing all that just takes away a lot of time. So doing it up here just becomes very, very effective right now. Last question that people have is how many screens should I have with my active trader? Obviously you should not have a lot of screens in my opinion. I think if a stock is setting up for a play then you should open up your active trader and set up the play. But you should not be watching 10 stocks and have 10 active traders open for each each one of those. That's just going to be a lot of different information. Like I mentioned in the upcoming videos, I will show you my breakdown. How I have my screen set up, what I look out for and how I have everything set up.