Trading options is similar to trading stocks. You can place an order after entering the quantity and price.
You can choose to buy open or sell short to establish new positions in an option; if you already have a long or short position in an option, you can also close the position through sell and buy operations.
U.S. equity options trading supports Limit Order, Market Order, Stop Limit Order, Stop Order, Limit if Touched Order, Market if Touched Order, Trailing Stop Limit Order, Trailing Stop Order.
Options are traded in units of contracts. Typically, one contract unit is equal to 100 shares (corporate actions may result in 1 option not being equal to 100 shares).
For example, in the case of option contract AAPL 170314 140.00C, its quoted price is $2, meaning the price (premium) of this contract is $2 * 100 = $200. Upon exercise, you will receive 100 shares of AAPL.
Trading hours for the options are 9:30-16:00 ET.
Note: Options do not support pre- and post-market trading, but some ETF and ETN options are late close exceptions and will trade until 16:15 ET.
Generally speaking, as the right party, longing an option does not require additional margin. However, in terms of account risk, longing an option is equivalent to converting part of your available funds into a non-collateralized option contract of equal value. As a result, the net assets in your account remain unchanged, but the funds available are reduced.
It can be approximated as follows: available funds = net assets - initial margin. The increased margin actually represents a decrease in available funds, similar in principle to when you buy non-collateralizable stock (margin rate of 100%).
Note: For the purpose of risk control, if you long an in-the-money or nearly at-the-money option within 3 hours before the close of the expiration date, the initial margin requirement to open a position will be calculated based on the buying power required to exercise the option.
When trading U.S. stock options, you may sometimes observe that some orders are filled at worse prices but your own order placed at a better price is not filled. This may be caused by the following reasons.
● The liquidity of the options market is normal. However, due to the special quotation rules of the U.S. market (BBO / NBBO), the bid and ask you see are the highest bid and lowest offer price of a particular exchange. Some orders may be routed to other exchanges for transactions.
In addition, when the market is inactive, it is possible for quotes from different exchanges to vary widely but not be updated timely, which may result in orders not being filled.
● Since there are Spread Orders in the market, an individual buy/sell order may not be filled.
For example, some brokerage firms allow customers to make a spread order by placing a long call order and a short call order. Both orders will be filled at the same time only if the prices of both orders match the ask and bid.
To take a specific example, an option on BABA has a bid price of $3.00 and the order is part of a spread order matched on the exchange. A $2.80 sell order submitted at this time will fail to fill may not be filled at 3.00.
All of the above descriptions are normal for the U.S. market. The options orders have been submitted and the outcome depends on the exchange.