Which Stock Options to Trade

create a watchlist

Why should you create a watchlist of stock options? There are thousands of stocks. It is impossible to monitor closely all of them. What stocks would you like to invest in? Successful traders restrict their attention to a small number of stocks. They enter the stocks in a watch-list.

How to create a Watch list

Today there are thousands different ETFs and stocks traded on the exchanges. Some stocks are traded with millions of contracts and others trade only a few. You decide to create a watch list with options that are liquid. These options are very actively traded. You want to get in and out the trade quickly without waiting too long. When you create a watch-list it is wise for traders to restrict their attention to only the most active or ‘highly liquid’ stocks and ETFs. Create a watch-list with stocks that interest you or ones you dislike.

 

Tools to create a watch-list

A watchlist can hold many details about each stock in addition to its name and symbol – one may wish to track volatility, the volume of shares trades, earning dates, dividends, etc. These details can easily be obtained for free from the Finance sections of free websites such as Google, Yahoo or Think or Swim.

To create a watch list for option trading can be rewarding and help boost your success rate. Here are few ways to devise your list. Choose options which are highly liquid and have high Implied Volatility. You can enter cheap stocks as well expensive ones.

Your stock watch list is a list of stocks that you will review on a daily basis. You will be studying the stocks and looking for potential trades. Create a stock watch list that consist of no more than 50 stocks. Having a watch list this large will ensure that you always have plenty of trading opportunities. Use these stock options to sell option premiums.

Where can You create a stock watch list? You can create a stock list in Excel. But you can also create a watchlist in Google or Yahoo.

Group stocks in a watch-list

During the process of creating a watch list take note of other stocks. Group stocks on your option trading list. This will help you to discover how the stocks in each group respond to overall market changes.

For successful options trading, watch the groups over a period of days so that you can detect their relative strengths and weaknesses to the market. If the market is rallying, review how the bearish stocks are behaving as well as your short positions.

This is my Watch List

My watchlist depends on the market. I choose stocks which are liquid, e.g. they are easy to trade. And I selected stocks that have options with a High Implied Volatility. This changes everyday. At the time this is publicised I watched:

AMZN FXI IBM RIMM  WFM
AAPL FXY IWM SBUX  X
BIDU GLD  MSFT  SLV  GPRO
C GLX  XLE  SPX  HLF
CMG GDX  XLU  SPY  LULU
COST GRPN  XRT  TLT  BAC
EBAY GE  YHOO  UNG  TBT
EEM GS  ZNGA  USO
EWJ  HPQ  NFLX  VIX
FB  IWM  PCLN  VXX

You can group the stocks in: commodity stocks, bonds, metals, currency and indices.

When you are ready with your watch-list and observing the stocks you want to sell options in order to receive option premium.

 

Video on creating a watchlist

We find a great video about creating a watchlist. Look at an episode of tastytrade.

 

Conclusion

A watch list is very useful to get a good market awareness. You got a feeling idea how stocks are moving individually and to the sector they belong. Read more about watch list in the article of how-to-select-an-option-trade

 

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