Trading Options

Executing a Trade

In This Section

Trading options can also be more complicated than trading a traditional investment, like a stock, where you simply give an order to buy or sell. With options, there are more choices. You can either "buy to open," "sell to open," "buy to close" or "sell to close." You open a position by either buying or selling a contract, and can close that position by doing the opposite at any point up until the expiration date.

Opening a new position creates one half of the contract that is matched by another buyer or seller who takes the opposing position. For example, if you sell to open, another investor will buy to open to fulfill the other half of the contract.

When you're ready to make a trade, you do so through a brokerage firm. Whether you're giving the order over the phone or online, you must give the following information to your firm:

  • The name and symbol of the option
  • Whether you're opening or closing a position
  • Whether you're buying or selling
  • Whether you want a put or a call
  • The strike price
  • The expiration month
  • Whether you're paying with cash or through a margin account
  • Your order type (market, limit, etc.)

You are given the opportunity to review the details of the trade before you agree to it. After you give your final consent and your order is submitted, you'll receive an order confirmation if your order is executed.

Because you're going through a brokerage firm, you'll owe a commission every time you make a trade. Though the amount varies from firm to firm, cost is always an important consideration before you pursue any strategy.

Options involve risk and are not suitable for all investors. Detailed information on our policies and the risks associated with options can be found in Scottrade's Options Application and Agreement, Brokerage Account Agreement, and Characteristics and Risks of Standardized Options (available at your local Scottrade branch office or from the Options Clearing Corporation at 1-888-OPTIONS or by visiting www.888options.com). All option accounts require prior approval by Scottrade. Market volatility, volume, and system availability may impact account access and trade execution. Supporting documentation for any claims will be supplied upon request.

PrintShare in STOC
 
Featured
Online Community

Education meets interaction in the Scottrade Community. Join Scottrade customers from all over the country as you exchange information, ideas and trading strategies in a comfortable online learning environment.

Interact with Scottrade customers and product specialists. Share your thoughts and learn from others. Grow as an investor. Join our community today!

Learn More About the Community >
The information and content provided in the Scottrade® Knowledge Center is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.