How To Trade Options On TradingView - The Forex Geek (2024)

Author: The Forex Geek | Published: August 4, 2023

TradingView is a popular online platform that offers advanced charting tools, technical analysis, and real-time market data for a wide range of financial instruments, including stocks, forex, cryptocurrencies, and options. While many traders use TradingView for stock and forex trading, some may not be aware that it also provides options trading capabilities. Options trading can be an excellent addition to your trading strategy, as it allows you to leverage your capital and profit from both rising and falling markets. In this article, we will guide you through the process of trading options on TradingView.

Understanding Options

Before diving into options trading on TradingView, it’s crucial to understand the basics of options. An option is a derivative contract that gives the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price (strike price) on or before a specified date (expiration date). Options are often used for hedging, speculation, or income generation. Trading options involves higher risks compared to trading stocks or forex, as options have an expiration date, and their value is affected by various factors such as underlying price movements, volatility, time decay, and interest rates.

Accessing Options Trading on TradingView

To access options trading on TradingView, you need to subscribe to a data provider that offers options data. Several brokers and data providers support options trading on TradingView, and you can check TradingView’s website for a list of supported partners. Once you have access to options data, you can start exploring and trading options on the platform.

Navigating to Options Trading

1. Login to TradingView: If you already have a TradingView account, log in using your credentials. If you are new to TradingView, sign up for a free account to get started.
2. Select a Chart: After logging in, select the desired financial instrument by entering its symbol in the search bar or browsing through the available markets.
3. Open the Chart: Once you select the financial instrument, a chart will open with various technical analysis tools and options available.
4. Locate the “Options” Tab: To access options trading, navigate to the “Options” tab, which is usually located below the chart or on the right sidebar, depending on the TradingView layout you are using.

Analyzing Options Data

Before executing an options trade, it is essential to analyze the options data and understand the factors that can impact an option’s price. TradingView provides a range of tools and indicators to perform technical analysis on options. Here are some key data points and factors to consider:

1. Option Chain:

The option chain displays all available options for a specific underlying asset, with various strike prices and expiration dates. It shows both call and put options, organized in a tabular format. The option chain provides valuable information, such as the bid and ask prices, open interest, and volume, for each option contract.

2. Implied Volatility:

Implied volatility represents the market’s expectation of the underlying asset’s future price volatility. Higher implied volatility indicates greater price fluctuations, making options more expensive. Lower implied volatility suggests calmer market conditions and lower option premiums.

3. Greeks:

Options Greeks are essential risk measures that help traders understand how an option’s price will change concerning different factors. The primary Greeks include Delta (sensitivity to underlying price changes), Gamma (rate of change in Delta), Theta (time decay), Vega (sensitivity to implied volatility changes), and Rho (sensitivity to interest rate changes).

4. Option Strategies:

TradingView provides a wide range of built-in option strategies, such as covered calls, straddles, and iron condors. These strategies can help you visualize potential profit and loss scenarios and manage risk more effectively.

Placing an Options Trade

Once you’ve analyzed the options data and identified a potential trade, you can proceed to place your options trade on TradingView. Here’s a step-by-step guide to executing an options trade:

1. Select the Option Contract: From the option chain, choose the specific option contract that you want to trade. Consider the strike price and expiration date that align with your trading strategy.
2. Choose the Trade Type: Decide whether you want to buy (open a long position) or sell (open a short position) the option contract.
3. Set the Order Parameters: Enter the number of contracts you wish to trade, the order type (market order or limit order), and the price at which you want to enter the trade.
4. Review and Confirm: Double-check all the trade parameters before submitting the order. Verify the order details, including the symbol, contract, quantity, and order type.
5. Execute the Trade: Once you are satisfied with the trade setup, click the “Place Order” button to execute the options trade.

Risk Management

Options trading involves significant risks, and it is essential to implement proper risk management strategies to protect your capital. Here are some risk management tips for options trading on TradingView:

1. Start Small:

If you are new to options trading, begin with a small trading size to limit potential losses while you gain experience and confidence in your trading strategy.

2. Use Stop-Loss Orders:

Consider using stop-loss orders to automatically exit a position if the option’s price moves against your expectations. Stop-loss orders can help you limit losses and protect your capital.

3. Diversify Your Trades:

Avoid putting all your capital into a single options trade. Diversify your trades across different assets and strategies to spread risk effectively.

4. Educate Yourself:

Continuously educate yourself about options trading, market trends, and strategies. Stay updated with the latest news and events that can impact the financial markets.

Conclusion

Trading options on TradingView can be a valuable addition to your trading toolkit. With access to real-time options data, advanced charting tools, and technical analysis capabilities, TradingView provides a robust platform for options traders. Remember that options trading involves risks, and it is crucial to educate yourself, conduct thorough analysis, and implement effective risk management strategies. By following the steps and tips outlined in this article, you can begin your options trading journey on TradingView with confidence and increase your chances of success in the dynamic world of options markets. Happy trading!