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Confidence Boost: Tools to Help Hone Your Options Strategy

October 12, 2017
Confidence Boost Options Strategy
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Are you new to options trading? Do you have a potential options trade idea but you're not quite confident enough to pull the trigger? Since it may be unwise to put on a trade that you're not confident in making, you may be on the lookout for a tool, or maybe even an advisory service, to help you get that needed boost. Here is a potential tool for TD Ameritrade clients: the Risk Profile tool in the thinkorswim® platform.

I Think I Know Just the Thing

If you already have an option trade in mind, you can use the Risk Profile tool in the thinkorswim platform to analyze and stress-test your trade idea. After logging into the platform, click the Risk Profile tool under the Analyze tab. You can visualize a trade’s potential P/L based on different factors including changes in the price of the underlying stock, implied volatility, and with the passage of time. See figure 2.

Risk Profile Tool


Analyze a trade with the Risk Profile tool on the thinkorswim platform. For illustrative purposes only. Past performance does not guarantee future results.

If you’ve ever wondered what your trade might look like in one week’s time, with the stock up 10% and the implied volatility down 10%, this might be the tool for you. For example, you can tweak the components of an option trade, from a single option to a multi-legged strategy (such as the iron condor in figure 2). You can play around with strike prices, expiration dates, price changes in the underlying stock and more. Or scrap your potential strategy altogether and analyze a different one.

I Think I Need Help—Where Do I Start?

If you’re not quite ready to dissect an iron condor, the TradeWise advisory service can help guide you through different option strategies. For a fee, TradeWise will serve up advice, real-time trading ideas, and even specific trade recommendations. If you’re brand new to options trading and don’t even know where to start, then having a risk defined trade idea land in your email inbox can really help shorten the learning curve.

Even if you consider yourself a more seasoned trader, seeing the methodology veteran floor traders use to initiate and manage trades can be enlightening. There may be some things you’ve never considered, or never been aware of. In addition, if you have a TD Ameritrade brokerage account, trade recommendations can be automatically entered into your account by setting up Autotrade*. (Note: standard commissions and fees apply).

Remember, just because the trade ideas are coming from an advisory service does not mean that they can't lose. Options trading involves significant risks, including risk of loss and is not appropriate for everyone. Regardless of where a trade idea comes from, have a plan and only trade what’s appropriate for your objectives and risk tolerance.

Whether you consider yourself a greenhorn, a cagey veteran, or somewhere in between, there’s a tool that can perhaps show you something new, or help give you the boost of confidence you might be looking for.

Powerful Platforms, Powerful Tools

Get trading access at many levels, from device-optimized mobile apps to the professional-grade thinkorswim® platform.

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