Options Trading Grade: B
Overview:
TradeKing offers a compelling options trading platform. Looking up specific contracts to trade is convenient and easy. Initializing new trades from the trade ticket menu and closing existing positions from the holdings menu are both well done. Canceling and modifying open trades works perfectly. Option order types is extensive, especially for a web based trading platform. Looking up detailed option contract information could be handled better and the options price charts need a lot of improvement. Trade confirmations display the date of execution but not the hour or the minute. Besides these drawbacks, TradeKing offers a solid platform for all option trader types.
Option Order Types:
- Basic (one option leg) - Buy or sell a single put or call
- Roll (one option leg) - Cover one option and initiate a different option position of later expiration
- Covered Call (stock + one option leg) - Buy stock and sell call option
- Protective Put (stock + one option leg) - Buy stock and buy put option
- Collar (stock + two option legs) - Either (1) Buy a put option, sell a call option and short the corresponding stock or (2) sell a call, buy a put and buy the corresponding stock
- Spread (two option legs) - An order to simultaneously purchase and sell options at different strike prices, where both have the same underlying, right (call or put) and expiration date.
- Straddle (two option legs) - Buy/sell a put and call with matching strikes and expiration
- Strangle (two option legs) - Buy/sell a put and call with matching strikes and varying expiration
- Combo (two option legs) - Either (1) buy a put option and sell a call option or (2) sell a call and buy a put
- Butterfly (three option legs) - Buy an option with one strike price, buy an option with a second strike price, and sell two options with a third strike price that is midway between the prices of the first two options
- Condor (four option legs) - Buy two options and sell two options. All options are either puts or calls.
- Double Diagonal (four option legs) - A pair of diagonals
- Four Leg Free Form (four option legs) - Any combination of four option legs
Details:
To trade options at TradeKing, hover over the trading tab and select Options / Basic from the drop down menu. This brings up the basic options trade ticket. I knew that I wanted to purchase a put option based on SPY, the SPDR S&P 500 ETF, but I did not know the symbol. In the trade ticket, I entered the underlying symbol, expiration, strike price and whether I wanted to purchase a put or call. This then populates the option contract symbol in the trade ticket - very convenient and done far better than at most other brokers. Finally, I selected an appropriate limit price and duration and selected to preview the order (click on images for larger views):
This brought up the preview order menu, with a warning that since the market was closed at the time, my trade would be processed during the next trading day. I selected to place the order:
My order was submitted and a confirmation screen appeared. I decided to check the order status so I clicked on the order status button:
This brought up the order status menu. From this menu, orders can be modified or canceled, with each action instantly updating the trade on the order status page. I decided to let me trade go through.
Once my trade executed, it could be viewed from the holdings menu. I decided to close out my position so I clicked on the trade link next to the contract name:
This brought up the trade ticket with the action, contracts and symbol auto populated. Like the rest of the TradeKing options trading engine, this is well done.
One drawback to TradeKing's option trading system is that there is no way to access option charts or analytics from the trade ticket menu. To look up more information on a specific option contract, users have to select the Quotes + Research menu and type in the option contract by name. Here is an example of the page I retrieved for the contract QQQ XS, a December 45 Put on QQQQ, the PowerShares NASDAQ index ETF:
The price chart featured on this page is small and has only a limited number of duration choices. This seems to be the only options chart available to us, which is disappointing because it is nearly useless.
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