Lesson 2
Finding Trades for a Single Stock
There are various ways to trade options. One way is to do technical analysis on a stock and then as a result of your analysis you project that the stock is trending up or down, and not going sideways. This is called trading directionally. This article will show you step by step how to find directional trades using OptimalTrader.
Starting Point
When OptimalTrader first starts, you begin at the Starting Point page. From here you begin any task that you want.
Click on the button called, "Find possible trades for ONE stock".
SingleFind
For this example, we are bullish on QQQQ and believe that it will go higher from here. Not only determining where a stock will go, but when it will get there, are vital steps in directional option trading. For your own practice, pick a favorite stock and enter in your projections.
We are just concentrating on the basics right now. Just enter the first three fields. 1) The stock symbol, 2) the projected price, 3) the projected date. By entering these parameters you are saying that you believe that this stock will reach a certain price on a certain date. Of course the more accurate you can be, the higher your profits will be. Once you have entered your parameters, click on the "Next Step >>" button.
Strategies
On this screen you will select the strategies you want to employ for this search. The page is divided into standard, risky, and advanced trade categories. For purposes of this lesson, turn on all the standard strategy checkboxes using the "Turn On" button located in that section, or by individually checking the boxes that you want. For instance, since we are bullish in this example we may not want to Buy Puts. Select the appropriate boxes for your particular situation and then click on the "Begin the Search" button.
The program will begin searching the stock using each strategy to find trades. Each trade has certain rules it uses to find trades with. When it finds a trade that meets those rules, it keeps track of which ones should perform the best within its search type and adds them to the Search Results page. The current progress of the search is displayed at the bottom of the page. When it is finished, you will see a "Search Complete" message.
Please be aware that for most strategies, you can right click on the strategy to customize the search criteria to limit the results and to speed up your searches So if your search takes too long. or a search fails to find trades, you may find that customizing the trade will solve your problem.
Search Results
At this point you have a lot of decisions to make. The right choice has to fit your trading style and hopefully make you a profit. Some trades have a high reward to risk potential but also have a small chance of being successful. The Search Results screen allows you to sort by any criteria. You could sort by profit/loss percentage (default), or sort on any other column including all of the greeks.
When you see a trade which you want to investigate further, then click on the row of the trade that you want to take a closer look at. Clicking on a trade will cause more details for the trade to be displayed in the lower portion of the screen. It will display the details of each leg, the type of trade, and a short commentary of the trade based on the greeks of the trade.
If you want to view the risk graph for this trade, then click on the "View" button. This will cause this trade to be transferred to the risk graph page.
Risk Graph
Spend more time today searching for different trades on different stocks. You may want to try some of the advanced strategies. If you have more time, you will see that you can also save the search results to disk, or load a previous search results back into the grid. You can also save the search results in comma delimited format so that it can be imported into Excel.
End of Lesson 2.