If you have just started option trading, you might be thinking about what should be your next trade. Searching on google will land you a bunch of answers, but most of them don’t come from reliable sources.
So how do you find option trading ideas worth executing? It is important to note that you won’t find a ready-to-serve idea anywhere. Discovering trading ideas that pay off is a process.
Before we delve into how to discover them, let us understand how having an option trading plan in place pulls it all together.
What is an Option Trading Plan?
An option trading plan is the starting point for finding new option trade ideas. The basic idea is to develop a market outlook and decide how to trade that outlook. The most important part of an options trading plan is to have an exit strategy in place, complete with profit targets and loss thresholds.
The next step is to evaluate your trade ideas so you can adjust your decisions accordingly. Lastly, monitor and re-evaluate the trade so you can adapt to changing market scenarios. Once you have an option trading plan, it is time to discover new trading ideas.
How to Discover Option Trading Ideas?
Now that you have a plan based on your trading goals and risk appetite, here is how to discover new ideas for options trading.
1. Chase Your Market View
This is a great way to find new option trade ideas for people who trade depending on their views. If you have a bullish view of the market, you can choose options that you expect to boom. Dependable trading platforms such as Dhan provide new trade ideas every day depending on bullish, bearish and neutral market outlooks.
2. Fundamental/Technical Analysis
You can filter your search depending on options that are fundamentally healthy and show promising performance on technical graphs. Pay off graph helps you analyse the profit and loss and risk/reward policy of the options you choose. You can also utilize option greeks to measure the sensitivity of your option prices.
3. Utilise Option Screeners
When you look minutely at options and analyse them, you are bound to find new trading ideas. With option screeners, you can monitor and analyse the entire market. Screeners are based on technical indicators like Volume Gainers, OI Gainers, OI Losers, Price Gainers, and Price Losers. Thus, you have much better chances of finding better trading opportunities.
4. Use Market Scanner
As the name suggests, a live market scanner scans the entire options market and keeps updating constantly. It helps you keep track of the latest price trends in options and find a profitable trade idea. The best part is that any price breakout or trend informs the trader in real-time.
5. Observe Option Chain
An option chain showcases all available option contracts for a particular underlying asset. It lists all calls, puts, strike prices, expiration, and pricing of that asset. Thus, by observing the live option chain, you can find ideas with the potential for generating returns.
Conclusion
Option trading can be potentially profitable for traders. Remember not to take trading advice from unreliable sources online. Develop your trading plan and find option trade ideas based on real-time market facts. Reputed trading platforms like Options Trader by Dhan provide all tools and benefits that you need to find your next option trading ideas.