Each trade alert will include two main parts:
Here is an example of what to expect:
Action to take: Open a Green Trade (Call Trade) on Crown Castle International Corp. (NYSE:CCI)
Buy-to-Open the CCI August 16, 2019 $130 Call (CCI190816C00130000)
Pay no more than $1.90
Enter as a day-only order
Sell-to-Close the CCI August 16, 2019 $130 Call (CCI190816C00130000) for 100% profit – or if you hear from me.
In this example’s entry instructions:
The ticker symbol is CCI.
The contract’s expiration date is August 16, 2019.
The strike price is $130.
It is a call contract.
(CCI190816C00130000) is called the options chain and is simply the computerized version of writing the contract’s information. You will likely not need to provide the options chain.
“Pay no more than $1.90” indicates that your order type should be set to “Limit,” and your limit price will be $1.90. This will tell your broker you are only willing to pay up to $1.90 per unit per trade. (Note: Each options contract is made up of 100 units, so one contract in this example costs a total of $190.)
The time-in-force is set to “Day” (aka “Day Only”) in this example. That simply means your broker will only attempt to fill (complete) your order on the day the order is submitted and will automatically cancel the order if a contract at your set limit price is not available.
In order to make use of your exit strategy, you must first submit your entry order and get filled for the position (meaning you now own the contract). Once you own the contract, you can select to “Sell” or “Close” the position. All the contract information should populate, but you will need to change a few key fields.
The section that says, “for 100% gains or more,” indicates that you will need to set your order type to Limit. Next, you will calculate what 100% gains would be based on the price you paid to enter the trade. If, for example, you paid $1.90 to enter the trade, you will set your closing limit price to $3.80.
Be sure your time-in-force is set to Good until Cancelled (GTC) since you want your broker to continue attempting to close the position for the next few days or weeks until the limit price is reached.
A Note on Spread Trades:
If you come across a spread trade, all of the information above is applicable, but you will need to add a second (or third) options leg. Some brokers will have a dropdown menu giving you a variety of options strategies including some of the more common vertical call or vertical put spreads. These would be used for two-line spreads when the expiration dates are the same on both legs of the trade. The calendar call or calendar put spread would be used for making two-line spreads with contracts that have different expiration dates. The Straddle will be used when we are buying (or selling) both a call and a put with the same expiration and strike price.
Rather than select the strategy, other broker platforms may simply have a button to add another leg in the options order area. You will need to carefully add all the correct information as written in Tom’s trade alert.