Picking the Right Platform for Online Options Trading

Views 707 Feb 21, 2024

Select an online options trading platform

Trading options can offer a unique set of benefits in comparison to trading stocks.

When investing with options, you may find more opportunities to potentially profit from unique market conditions and more trading possibilities. You can also determine your theoretical risk before you make the trade, hedge your portfolio, as well as gain more exposure to the underlying asset with fewer dollars. However, options also come with significant risks.

Investors should also be aware that it's possible to lose the entire principal invested, and sometimes even more. Additionally, as the holder of an option (buyer), you risk the entire amount of the premium you pay. But as an options writer (seller), you take on a much higher level of risk, such as during an options assignment where you potentially have to buy or sell a stock at an unfavorable price. Sellers of naked option positions are also exposed to significant and sometimes unlimited loss potential.

While options trading may provide more flexibility to build your portfolio, being able to trade options online or on the go opens a new world of opportunities for active traders. When it comes to selecting an online trading platform, you should consider one with features that can help you to build a well-informed strategy and help you meet your investment goals, including:

Real-time data
Analysis tools
Screening tools
Educational resources

To help you get started, we have done a deep dive into online trading platform features that options traders can utilize to help inform their decision-making and strategies when trading options contracts. Let's begin.

Analysis tools

A helpful platform can also feature easy-to-use analysis tools that help streamline the data you need to make faster, more informed decisions. Here's a few tools to help you in your options trading journey.

Open Interest: Open interest is the number of current open options contracts positions. These positions have neither been closed out nor expired. Understanding an option's open interest can help explain its liquidity. With higher open interest, this can represent a more liquid market and more open positions, while less open interest suggests a more illiquid market, affecting the ability to potentially execute an options trade.

Furthermore, open interest can help you interpret potential signals, such as:

When open interest rises at the same time as prices, there is a bullish sentiment in the market fueled by long positions.
If the open interest is declining while the prices increase, it can be a bearish sign that money is leaving the market.
When open interest rises despite prices falling during a downtrend, it is typically a bearish sign, signaling that new money is entering the market on the short side.
If both open interest and the price fall, it can indicate that a selling climax may be coming up or that owners are being forced to liquidate their positions.
If a high level of open interest remains intact while prices are dropping rapidly, it can signal that holders who bought around the top are losing money — a sign that may lead to panic selling.
Strike prices with the most open interest are usually the ones that many traders expect the stock price to move toward and form potential support and resistance zones.

Volume: The volume of option contracts traded can be essential for an informed trading strategy, based on current liquidity and potential price changes. Traders can benefit from viewing the current intraday volume of options contracts traded in relation to the amount of open interest for those contracts.

For example, if the volume is higher than the existing open interest on a specific trading day, it may indicate that trading for that option was exceptionally high.

And keep in mind, by finding a platform that offers up-to-date information on open interest and volume can enable you to take a deeper look at your strategy and determine which tactics may work best for you.

Screening tools

Screening tools can help compare options contracts and determine which ones may fit your options trading strategy.

Options Rankings

If you want to understand the different ways various options contracts are currently being traded in comparison to each other, a good ranking list can help. With detailed rankings, you can understand how options contracts for top companies, actively-traded ones, and indexes are being traded to better understand the current marketplace.

In addition, a good platform can offer very detailed rankings with a large variety of indicators to compare. This can enable users to quickly analyze and visualize the current market trends and consider how to potentially use this information to make informed trading decisions.

For instance, you may want to use a platform that includes this options trading information:

Volume: Total volume, strike price, price change, and percentage change
Open interest: Total OI, OI value, strike price, OI increase, and OI decrease
Turnover: Turnover volume, price, and percentage, mid, bid, bid volume, ask, and ask volume
Implied volatility rankings
Block trades
Top 0DTE options by volume

Unusual Options Activity

While you can conduct analysis independently by comparing open interest and trading volume, a data-focused platform can offer you built-in unusual options activity. This helpful feature can display a list of securities whose options are showing higher than average volume.

Many traders may look for high daily trading volume spikes to find potential trading opportunities. You can get a closer look at what strike prices and strategies major institutions or market makers are implementing and try to gauge how you can potentially capitalize off their movements.

Educational Resources

Learning to trade options can seem like an enormous task at the beginning, but reliable resources can help.

If you are just getting started, you may want to find courses to help you learn options basics as options trading requires different skills than stock trading. Whether you are new or experienced with options trading, there is always more to learn by utilizing a trading platform that offers instructions and guides on how to use options strategies, analysis tools, and real-time data.

Trading options online with moomoo

When it comes to finding a trading platform that offers a lot of useful options and features to help build a well-informed strategy, moomoo can be a platform option. Whether you want to trade on the desktop version or on the go with the app, you can find all the information you need to stay on top of the market.

Moomoo's real-time data is updated in as little as every 0.3 seconds and laid out in easy-to-use tables and charts, making it easier to stay up to date with information and potentially not miss out on trading opportunities because of slow information or a lack of resources. We also offer key analysis tools like detailed options rankings and screening tools such as unusual options activity. And with online courses and options paper trading, we strive to make options trading accessible for traders of all levels.

Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Options (https://j.us.moomoo.com/00xBBz) before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options.