How do I research stocks for options trading?

Finding The Right Stocks

1. Do some research.
2. Choose liquid stocks to invest in.
3. Look for medium to higher priced stocks.
4. Consider trading reasonably volatile stocks.
5. Look at historical data and charts to identify trends.
6. Identify upcoming events that might impact stock prices.

How do you predict the direction of a stock?

The Put-Call Ratio (PCR): PCR is the standard indicator that has been used for a long time to gauge the market direction. This simple ratio is computed by dividing the number of traded put options by the number of traded call options.

What do options tell you about a stock?

A call option gives you the right (but not the obligation) to purchase 100 shares of the stock at a certain price up to a certain date. A put option also gives you the right (and again, not the obligation) to sell 100 shares at a certain price up to a certain date.

What is the best stock research site?

Top Stock Market Investment Research Sites

1. Motley Fool Stock Advisor. Motley Fool Stock Advisor is a premium Motley Fool product that’s been educating retail investors for 15 years.
2. Motley Fool Rule Breakers.
3. Trade Ideas.
4. Atom Finance.
5. Zacks Investment Research.
6. Motley Fool Everlasting Stocks.
7. Stock Rover.
8. Mindful Trader.

What is a good option delta?

So, a Delta of 0.40 suggests that given a $1 move in the underlying stock, the option will likely gain or lose about the same amount of money as 40 shares of the stock. Call options have a positive Delta that can range from 0.00 to 1.00. At-the-money options usually have a Delta near 0.50.

Can options predict stock price?

Why do option prices predict stock returns? Option prices significantly predict stock returns: stocks earn low returns when put options are expensive relative to call options. We attribute most of this predictability to the association between option prices and the conditions in the securities lending market.

What are the best technical indicators for trading options?

The sporadic jumps in the interim provided a lot of trading opportunities for traders to cash in on short-term price moves. Any volatility index (like VIX, also called the CBOE volatility index) is another indicator, based on options data, that can be used for assessing the market direction.

What if you had a tool to predict a stock’s next move?

If you had a tool to tell whether a stock’s next move would be higher or lower, your ​investment results would be pretty impressive. If you could easily and quickly check any and all ​stocks against just such a tool before you traded them, your portfolio might grow rapidly.

What is an overbought condition in the stock market?

For example, if an incredible company (with everything going for them) drives higher prices, investors will stampede into the shares, causing the investment to quickly reach an overbought condition. This causes prices to climb too high for the market to endure, because of buyer resistance to exorbitant prices.

What do the trend lines mean in trading?

The trend lines are parallel suggesting an orderly bounce attempt. When the stock falls back under the lower trend line, a breakdown triggers causing the downtrend to resume as stock falls to new lows. Bull Flags: These are continuations patterns, which allow traders to enter an uptrending stock on a pullback.