Trading Options on Blue Chip Stocks
Trading Options on Blue Chip Stocks
We recently caught up with Teresa, and here’s a brief overview of what she shared trading options on blue chip stocks using BlackBoxStocks alerts.
When I first started trading, I had no idea what I was doing. I didn’t know the terminology, how to find a strategy, and I really didn’t know how to find the stocks that were likely to give me big gains. BlackBox is the trader’s toolbox. It gives me everything I need in one place – actionable data, a knowledgeable community, and continuing education. Let me show you a little bit about how I use the system.
There are two sides of the platform – the stock side and the options side – each with different types of data. I am an options trader and I look for stocks moving on momentum. My trading day actually starts the night before, with the post market scanner. It is not populated right now because we are showing the system during normal trading hours, but this scanner provides me with information specific to the after-hours trading session. The volume and percentage gain details are only for the after-hours time frame, so it enables me to quickly narrow down thousands of tickers to just those that are making big moves. The post-market scanner is the beginning of my watch list for the next day.
The next morning starts with the pre-market scanner. Again, this scanner gives me data specific to the pre-market action. Here I see the biggest movers in the morning and compare those to my list from the night before in order to start narrowing my watch list to those stocks with strong momentum.
Next is going through the news. Blackbox provides information from a variety of news sources, including my favorite, the Fly. News moves tickers and here the system makes it easy to drill down on the news I need quickly. For example, positive analyst ratings give stocks a boost, so I can click on the ratings filter and see only ratings information. Since I’m an options trader, the options filter shows me options specific news such as implied moves on earnings and bullish or bearish trade activity.
Trading Options on Blue Chip Stocks Using BlackBoxStocks Alerts
Next, I go through the alert log. Here is where BlackBox’s proprietary algorithms kick in to do some of the research heavy lifting. I trade options on blue chip stocks. I can filter the system so that I only see the stocks that fit my trading criteria. I want to see stocks over $50. The alert log then shows me color-coded alerts on stocks that meet the Blackbox alert specifications such as short alerts, premarket alerts, and price spike alerts. I can click on an alert and instantly see a chart; I can see the price where the alert was triggered; as well as the news specific to that stock. Options don’t start trading until the regular market session opens at 9:30am. I use all of these elements on the stock side of the platform to create the list I am watching at the open.
Next, I flip to the options side of the platform, join our live options trading room and get ready for the bell to ring. I have my watch list of potential trades from the stock side of the platform and now I put the power of the options platform to work.
BlackBox’s proprietary algorithms sort through millions of options trades to determine where big money is going. The alerts tab highlights a number of different types of options alerts for different types of traders and is a great place for new traders to start. As with any trade, you want to do some research to see if the alert meets your trading criteria. The system makes it easy to quickly research alert activity. The alert comes through, click on the alert to see the alert details, then click the options flow tab to see what activity triggered the alert. Next, review the news to see if there is any news behind money flowing into that particular option, next analyze the chart to see if it is at a good area for entering a trade (is the stock at support or resistance, or do you need to wait for a little pullback). The system also provides the next earnings date so you can see if the trade is covering the run up into earnings. Once you have done your research all that is left is for you to decide whether or not to take the trade. (walk through actual alert)
Options Flow Heat Map
A great feature for new traders is the options flow heat map. The heat map is designed to give you a visual representation of the day’s options flow. Options traders can make bullish or bearish trades by buying or selling options premium. The heat map makes deciphering trades as simple as green = bullish activity and red = bearish activity. The columns on the left are calls, while the columns on the right are puts and the center column highlights the options strike closest to the current trading price of the stock. Multiple timeframes are also represented, zero is the current week’s expiration, one is next week’s expiration, and two is all expirations two or more weeks out. The coloring in the cells is graduated so you can instantly see where the most activity is occurring by looking for the darkest colored cells, either red or green. The numbers inside each cell tell you the number of contracts traded. Cells without any shading indicate trades that were executed between the bid and the ask. Those trades don’t give us an indication of whether they are bullish or bearish.
Another one of my favorite data tabs is the volume tab. This tab is a great place to look for other trades throughout the day because it shows those stocks with options volume that exceeds their normal ten-day average. This tab provides a wealth of data. The ratio column tells you how many times the normal average in options the particular stock is trading (give example), while the other columns provide information on the put/call ratio, open interest, and changes in open interest from the previous day!
Speaking of open interest, the OI tab provides data on the top one hundred calls and puts sorted by the largest increases and decreases in open interest. Filters let you see the information that best suits your needs. This tab is a great place to research options trades where open interest is increasing (meaning the trade is still open) or decreasing (indicating the trade has been closed out).
One of newest features is the download button. Here you can easily download information from any of the data tabs into an Excel spreadsheet for further analysis. Simply click the download button and whichever tab you are on will be downloaded into a .csv file!
The platform is amazing but the two big elements that really propelled my early trading are the education and trading community within BlackBox. I was excited to be able to leverage my early trading experience to help develop the BlackBox Boot Camp. The Boot Camp is a comprehensive, 3-hour introduction to stocks and options and a complete walk through of the BlackBox platform! The Boot Camp is designed to help new traders ‘hit the ground running’! This is the first class all new traders should take. Finding and registering for a class as easy as clicking on the Support button, then Calendar, then clicking on the class you wish to register for. BlackBox has also partnered with the Options Industry Counsel to bring their complete library of classes to BlackBox members. All of the mods also do regular Q & A sessions every Tuesday and Thursday after the close so you can get all of your questions answered.
I owe much of my success to the very supportive BlackBox trading community. The mods and members alike welcomed me to the family and really helped me find my way. Everyone is so helpful, sharing their chart setups, trade setups, and trading experiences. New traders can leverage the years of experience of other traders and benefit from an array of perspectives to inform and validate their own trade ideas. The BlackBox community really is like a family where everyone is focused on making profits and supporting each other along the way. There are live trading rooms for low-float stocks as well as options and larger stocks. You can listen in all the action through the live channels. The trading community is diverse, global, and has countless years of experience in all types of trading. There is simply no other group of people that I would rather spend my trading day with.