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options trading

Best Options to Buy This Week

More people than ever are learning how to trade options. But knowing the basics of options trading is only half the battle: You need to know how to find the best options trades to make money.

That's exactly what you'll find here.

We'll show you the simple steps you can take to find profitable options trades.

Plus, we'll also show you the best options trades you can make right now, courtesy of the options experts here at Money Morning.

Speaking of experts, here's Money Morning's options trading specialist, Tom Gentile, with a brief overview on what makes options trading so phenomenal, plus why this is one of the best places to learn the ropes:



Why Options Trading?

Options are exploding in popularity because retail traders have seen their profit potential.

Stock options give you the right to buy or sell shares of a stock by a certain date. Since you don't actually own the stock, just the right to buy or sell it, you can control many more shares of the stock for a fraction of the price of owning them outright. That's called leverage. And it lets you amplify the profit potential of stock trades far beyond what you would see from simply buying and selling shares.

For even more detail on how this works, make sure you check out our guide on how to trade options.

What many new traders have found out the hard way is that there's more to making money with options than buying a call on a stock you like and waiting.

You need to find the right combination of a stock, the strike price of the option, the expiration date, and the cost of the contract to consistently find profitable options trades.

Here's how you can do it.

Finding the Best Options Trades

While there are a nearly limitless combination of options traders can use to create a strategy for any situation, we want to focus on finding trades using simple calls and puts.

There are three elements to key in on to take your trading to the next level.

Find the Right Strikes and Expirations
There are many variations of strike prices and expiration dates for every stock with options. A one-sized rule is nearly impossible.

But a few guidelines can help you find the best options.

First, look for strike prices just out of the money.

Options already in the money will be very expensive and that will cut into your potential gain.

Options far out of the money will be much cheaper, but the stock will have to move dramatically in order for you to make any money.

The best idea is to look for options one or two strikes out from the stock's trading price. This will give you the best combination of affordability and potential to hit.

Second, look for expiration dates three to six months out.

This is a broad rule since six months can be a lot of time, but you likely don't want to tie up your money any longer than that. And plenty of traders make good money with weekly options, but you'll want expert help before you dive in.

Similar to finding the right strike price, expiration dates nearer the current date will be cheaper if the options are out of the money. But you have little time for the stock to move, raising your chances of losing money. And if the option is in the money, close expiration dates will be very expensive.

Options with expiration dates far away will be more expensive since the stock has more time to get in the money too.

But an expiration date three to six months out is the sweet spot between giving the trade time to work – the stock moving into the money – and affordability, lowering your risk and maximizing your upside.

Trade Liquid Options
One of the most important factors new options traders overlook is liquidity in the options market. Liquidity simply means there are many buyers and sellers for a particular options contract. That means prices are accurate, and most importantly, you'll be able to sell your options contract when the time comes.

When the market for the specific options you're looking at isn't liquid enough, it means the price you see on you trading screen might not be the price you end up paying. It may even mean there are no sellers at all for the contract, meaning you can't enter the trade.

It also means that when you buy the contract, you may not be able to sell it. Imagine buying a call option on a stock that soars higher, seeing a profit on your trading screen, and not being able to sell the option for a profit.

The way to find options with liquidity is to look at the bid-ask spread. Options with close spreads are typically liquid enough to trade. If you see a wide range, or a range that includes $0, then the option is unlikely to be liquid.

That may eliminate little-known stocks from your plans, but that's all for the better. As Money Morning's options trading specialist, Tom Gentile, says, "98% of stocks and ETFs out there simply aren't worth a single penny."

But "the big banks and brokerage firms want you to gamble your money on all of them," says Tom.

That's why looking for liquid trades can go a long way toward making your moves more profitable.

Manage Your Risk
Options are great at helping you trade while lowering your risk, but that can go out the window if you aren't careful.

First, make sure you use limit orders when buying and selling options.

The options market can be fast-moving, and using a market order could mean you end up paying more for a trade than you initially expected. It may also mean you sell your contracts for less than you hoped. But using a limit order can make sure you get into and out of trades at the price you want.

Second, don't chase trades.

You may be dying to open a position on a particular option and see that your limit order isn't filling. Stay disciplined, and don't change your entry point just because the market isn't cooperating.

"If you do, you could end up buying at the high or near the high of the day only to see the markets calm down and the option prices start coming down," Tom tells us.

Third, stick with your plan.

Set aside a percentage of your portfolio you'd like to use for options trading and stick to it. It's tempting for traders, especially new traders, to make a ton of trades and chase bad money with good. That's only increasing your risk.

Tom tells us a simple strategy to managing your risk is to keep your risk the same on each trade. Even if you feel like the trade is going to be a home run, don't be tempted to increase the money you're putting in. Stick to your plan.

And never trade with money you can't afford to lose.

Best Options to Buy Right Now

Options trading is fast-paced, so you'll need to act quickly when you find the right trade. Not only do options change price as the expiration date nears, but changes in the underlying stock price can cause options prices to shoot higher or lower.

That means if you're looking for options trading recommendations, you can't rely on an idea that's out of date, even if it's just a few weeks.

Here at Money Morning, we publish options trade ideas multiple times a week.

You can find our latest trades right here…

Article Index

  • Options Trading: Three Ways to Win Big with a Bearish Calendar Spread
  • An Options Strategy That Will Save You Some Money
  • Don't Get Duped by Derivatives
  • Two Options Strategies That Can Turn Short-Term Price Gyrations Into Big-Time Profits
  • Hedging Strategies: At a Time of Record Gold Prices, This Simple Option Play Will Protect Your Profits

More Orders to Juice Your Options Trades and Preserve Your Capital

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 30, 2015

Options

The last thing you want to do is subject your money to the whims of your emotions. That's not investing - that's gambling.

I recently told you that orders are one of the best ways to remove your emotions from your options trades.

Today, I'll show you a few more orders to help you maximize your returns and protect your investing capital...

How to Use Orders to Target Options Trading Profits

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 25, 2015

buy sell dice

In the world of investing generally - and options trading in particular - it is not only important to know when to get in and get out of a trade, it is also important to know how to do so.

The markets move incredibly quickly, and you need to be prepared for whatever happens next. That means tailoring your orders to fit your trades, and having them into your broker ahead of time.

Using these ordering strategies, you can maximize your profits (and minimize your losses). Here's what you need to know...

The Options Trading Chart "Cheat" That Reveals Direction

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 24, 2015

Dow Jones Industrial Average

With options trading, I don't care WHICH direction a stock is headed. I just need it to move.

And this "simple" indicator tells me everything I need in one line...

How to Get Triple-Digit Gains on the Australian Dollar

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 18, 2015

Options

So, the Fed's going to wait to hike interest rates. That suits us just fine. Even if they had raised rates yesterday, it would still be way down on the list of risks we face right now.

At the top of that list, though, are what I've called the "Three Cs" of risk in this market: China, commodities, and currencies.

That's where the smart money is headed - and I'm going to show you the best way to profit from this shift...

Why Options Trading Is the Best Risk Management Strategy

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 16, 2015

Options

If you want to make money, you have to be in the markets.

The easiest way to stay in the markets in tough times is to make sure you've got a sound risk management strategy.

Options are the best risk management strategy in the markets. Here are four concrete ways you can use them to protect your investments and manage your risk...

What to Do When Options Trading Profits Arrive Ahead of Schedule

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 14, 2015

how to trade options

With options trading, even the smallest move in the underlying stock can result in explosive profits.

We just saw exactly this scenario play out with one of my Money Calendar recommendations. Those quick moves can work both ways - so you have to grab your profits when you can.

Today, I'm going to walk you through that winning case study and show you exactly what happened - and the best way to protect your profits. Let's get to it...

Finding Your Next Double with Options Trading

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 9, 2015

Options

The question I'm asked most frequently is how I select which options to trade on a particular stock.

Markets are global and so are your options. Everything that impacts the markets could affect your trades.

So how do I choose? I use this options trading strategy, which helps you target only those options with the chance to double your money before you even risk your first dime...

Why September's Volatility Is a Huge Opportunity for Options Trading

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 4, 2015

Options trading is one of the best ways to navigate market volatility.

Today, I'm going to explain the different kinds of volatility and how they affect the markets generally and options specifically.

This road map through the chaos, including a few of my favorite options strategies, will help you weather the storm. Let's get started...

Three Things Every Master Trader Knows About Options

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - September 2, 2015

options

The last two weeks have seen significant market action in both directions. It's just more proof that you need options in your portfolio to help cut your risk and boost your potential returns.

I want take this opportunity to reexamine some of the fundamentals of options trading.

Let's take a step away from the market chaos and get back to basics...

The One “Timing” Lesson You Need Now About Trading Options

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - August 13, 2015

Nasdaq

Trading options can be scary if you’re new to it. But the risk is mostly due to the fact that options have a fixed expiration date.

That’s why it’s important to get the timing on options trades right.

Here’s an easy way to do it…

Pick the Stock, Mark a Date on Your Calendar... and Collect Clockwork Profits

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - August 11, 2015

stock In a market like this, buy-and-hold investors often watch volatility eat away at stock gains. But there's a simple way to boost your return on investment while you hold shares for their long-term price appreciation and dividends. One of my favorite strategies is to use leverage to get the absolute maximum profit performance from my […]

Read More…

Oil's Tumble Means a Fast 30% Gain with This Trade

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - August 5, 2015

My wife and I were just at a children's birthday party. You know, the kind where everyone gets together to sing "Happy Birthday," and then the adults drift off into their own groups to chat.

Naturally, I fell in with a group of several wealth managers, and you'd better believe we started talking about the markets.

When the subject turned to oil shares, you could have heard a pin drop.

You see, some of those folks could be looking at a mighty lean year, depending on their oil exposure.

But as we know, there's an opportunity to make money as share prices fall. Today I want to show you how to book a quick and easy 30% gain on some very big, very liquid oil shares, even as the stock tumbles down.

It's the perfect energy play for markets like this...

This Overlooked Gold Play Could Bring Us 115%

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 31, 2015

I love gold right now, not despite, but because of everything that's happened to it this month...

Now, it's true that the "race to $1,000" triggered by the July 20 Asian bear raid appears to have the yellow metal on the ropes.

Have a look at this...

How Apple Stock Made Us as Much as 175% (While Wall Street Barely Made 3%)

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 23, 2015

Apple stock

There's no doubt that Apple Inc. (Nasdaq: AAPL) is a fantastic long-term hold. Its growth prospects are excellent, and it will hit $200 a share on its way to being the world's first trillion-dollar company.

That will be great for shareholders when it happens, but it's going to take more than a year to hit those milestones.

But I'm going to show you an easy-to-make trade that made my Money Calendar Alert Members as much as 175% in the 11 days it took shareholders to book just 2.46%.

Here's exactly how we did it...

The Power of the Loophole Trade

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades - July 21, 2015

amazon stock price

Today we're going to examine in granular detail a moneymaking tool called the loophole trade. And we're going to drill down and comprehensibly discuss why certain market conditions would compel us to recommend this tactic.

Remember: Through familiarity that's gained by the proper application of financial knowledge, you can overcome fear of volatility and risk.

We want you to confidently embrace the power of the loophole trade...

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