Things You'll Need:
- Broker thats trades ETF options
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Step 1
The first thing you need to do is make sure you have a broker like Ameritrade or Etrade and that they have approved you for trading options such as ETF's, ETFs are securities that you trade like a stock and are typically designed to follow an underlying index like the Russel 1000, symbol FAS, which can trade over 80 million shares a day. Most of the top brokerages will have ETF trading available for you. They will also have a ETF screener that can help you get started trading options. Companies like Ameritrade have a option screener called options 360 and a strategy trading platform.
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Step 2
On these options trading platforms you can enter the underlying symbol and it will tell you the current call and put options available.
If you don't know the underlying symbol for the option you can type in the stock symbol and it will show you the option symbol. Most of these option platforms will also tell you the volume ,strike prices and what month they expire plus many other charts and so on.Call and put option contracts are 1 contract equals 100 shares of the stock. The commission varies from each broker but it is usually about 75 cents a contract plus the regular trade commission. -
Step 3
ETF option trading takes some time to get use to .You need to study and learn about call and put options,which are the easiest to learn.A call option is where you believe the stock price is going to go up. A put option is where you believe the stock price is going to go down. Trading ETF options are fairly safe and you should only risk no more then 2% of your account on each trade. An example would be if you think that QQQQ stock is going to go down over the next three months you would buy a put option with a strike price three months out. The trading platform will automatically give you the price of the option which can change through out the trading day. Once your in the money you can sell the option or if the option expires out of the money you only lose a small amount compared to the amount if you had purchased the stock.
