Options Basics

An option is a contract between two parties: a buyer and a seller. It gives the buyer the right (but not the obligation) to buy or sell an underlying asset at a specific price, either on or before a certain date (known as “the expiration date”). Options can offer greater flexibility than simply trading a stock a itself, and can be used in a variety of different trading strategies.

The buyer of an option can choose whether or not to exercise the contract. On the other hand, the seller has the obligation to fulfill the terms of the contract if it's exercised. If the buyer decides to exercise their right, the seller is assigned and must carry out the agreed-upon transaction.

It's important to note that options trading carries significant risk and isn’t suitable for everyone. In order to begin trading options, you will need to complete an additional options trading application and and meet certain eligibility requirements. Be sure to carefully consider your investment goals and risk tolerance before considering exploring options trading.

Options Trading Risk Disclosure
Important Notice: Please Read Carefully
Trading in options involves substantial risk and is not suitable for every investor. Before engaging in options trading, you should carefully consider your financial situation, investment experience, and risk tolerance. By participating in options trading, you acknowledge and accept the risks outlined below:
1. Market Risk
Options are subject to the same market forces that affect other securities, including fluctuations in price due to economic conditions, company performance, and geopolitical events. The value of an option may decline, resulting in a total loss of the premium paid.
2. Leverage Risk
Options provide leverage, allowing investors to control a large position with a relatively small amount of capital. While this can amplify gains, it also significantly increases the potential for loss, including the possibility of losing more than the initial investment in certain strategies (e.g., naked calls).
3. Time Decay
Options are wasting assets, meaning they lose value as they approach expiration. This time decay can erode the premium paid for the option, even if the underlying asset remains favorable.
4. Liquidity Risk
Not all options are actively traded. Lack of liquidity may make it difficult to enter or exit positions at desirable prices, potentially resulting in unfavorable trades or inability to close a position before expiration.
5. Volatility Risk
Sudden and unpredictable changes in volatility can have a significant impact on option pricing. Even if the underlying asset moves in your favor, changes in implied volatility can reduce or eliminate profits.
6. Assignment Risk
Holders of short option positions (particularly uncovered calls) may be assigned at any time, requiring the delivery or purchase of the underlying asset at an unfavorable price7. Complexity
Options strategies can be complex and require a clear understanding of the mechanics, including the interaction between strike price, underlying asset price, expiration, and Greeks (delta, theta, gamma, vega). Misunderstanding these elements may result in unintended outcomes.
8. Tax Considerations
Options trading may have complicated tax consequences. Investors are encouraged to consult a qualified tax advisor regarding the tax implications of specific strategies.
9. Regulatory and Operational Risks
Trading platforms may experience outages, delays, or errors. Regulatory changes can also impact the availability and terms of certain options products.
________________________________________
Acknowledgment: By participating in options trading, you confirm that you understand the risks involved and have reviewed this disclosure. You are encouraged to consult with a financial advisor or professional before initiating any options trading activity.

Options are generally divided into two main types based on what they allow the buyer to do: call options and put options.

Call Option – The Right to Buy
A call option gives the buyer the right (but not the obligation) to purchase a specific asset at a set price within a certain time frame. Buying a call is similar to taking a long position in a stock—an investor hopes that the price will go up before the option expires so that they can profit from the increase.

Put Option – The Right to Sell
A put option gives the buyer the right (but not the obligation) to sell a specific asset at a set price within a certain time frame. Buying a put is like taking a short position—the investor is expecting the price to go down so they can sell at a higher price than the market is offering when the option expires.

Options Trading Risk Disclosure
Important Notice: Please Read Carefully
Trading in options involves substantial risk and is not suitable for every investor. Before engaging in options trading, you should carefully consider your financial situation, investment experience, and risk tolerance. By participating in options trading, you acknowledge and accept the risks outlined below:
1. Market Risk
Options are subject to the same market forces that affect other securities, including fluctuations in price due to economic conditions, company performance, and geopolitical events. The value of an option may decline, resulting in a total loss of the premium paid.
2. Leverage Risk
Options provide leverage, allowing investors to control a large position with a relatively small amount of capital. While this can amplify gains, it also significantly increases the potential for loss, including the possibility of losing more than the initial investment in certain strategies (e.g., naked calls).
3. Time Decay
Options are wasting assets, meaning they lose value as they approach expiration. This time decay can erode the premium paid for the option, even if the underlying asset remains favorable.
4. Liquidity Risk
Not all options are actively traded. Lack of liquidity may make it difficult to enter or exit positions at desirable prices, potentially resulting in unfavorable trades or inability to close a position before expiration.
5. Volatility Risk
Sudden and unpredictable changes in volatility can have a significant impact on option pricing. Even if the underlying asset moves in your favor, changes in implied volatility can reduce or eliminate profits.
6. Assignment Risk
Holders of short option positions (particularly uncovered calls) may be assigned at any time, requiring the delivery or purchase of the underlying asset at an unfavorable price7. Complexity
Options strategies can be complex and require a clear understanding of the mechanics, including the interaction between strike price, underlying asset price, expiration, and Greeks (delta, theta, gamma, vega). Misunderstanding these elements may result in unintended outcomes.
8. Tax Considerations
Options trading may have complicated tax consequences. Investors are encouraged to consult a qualified tax advisor regarding the tax implications of specific strategies.
9. Regulatory and Operational Risks
Trading platforms may experience outages, delays, or errors. Regulatory changes can also impact the availability and terms of certain options products.
________________________________________
Acknowledgment: By participating in options trading, you confirm that you understand the risks involved and have reviewed this disclosure. You are encouraged to consult with a financial advisor or professional before initiating any options trading activity.

Options can be traded in the same way as stocks, by entering the quantity, price and then submitting your order.

There are two ways to access options trading, as long as your account is already approved for options:

1. You can click Markets, search for a stock or ETF, and then tap the “Options” button next to the search result.

2. Alternatively, you can also click the security’s search result and select “Options” next to the Trade button at the bottom of the screen.

Once in the options screen for the position, choose the options strategy you’d like to trade within the Options Chain, and it will bring you to the Order screen. Choose "Buy" to purchase the option, or "Sell" to sell to open. If you already have a long or short position in an option, you can also close your position before the ex-date. Please note we currently only support long side trading.

Additionally, keep in mind that we currently only support limit orders for US options trading.

Options Trading Risk Disclosure
Important Notice: Please Read Carefully
Trading in options involves substantial risk and is not suitable for every investor. Before engaging in options trading, you should carefully consider your financial situation, investment experience, and risk tolerance. By participating in options trading, you acknowledge and accept the risks outlined below:
1. Market Risk
Options are subject to the same market forces that affect other securities, including fluctuations in price due to economic conditions, company performance, and geopolitical events. The value of an option may decline, resulting in a total loss of the premium paid.
2. Leverage Risk
Options provide leverage, allowing investors to control a large position with a relatively small amount of capital. While this can amplify gains, it also significantly increases the potential for loss, including the possibility of losing more than the initial investment in certain strategies (e.g., naked calls).
3. Time Decay
Options are wasting assets, meaning they lose value as they approach expiration. This time decay can erode the premium paid for the option, even if the underlying asset remains favorable.
4. Liquidity Risk
Not all options are actively traded. Lack of liquidity may make it difficult to enter or exit positions at desirable prices, potentially resulting in unfavorable trades or inability to close a position before expiration.
5. Volatility Risk
Sudden and unpredictable changes in volatility can have a significant impact on option pricing. Even if the underlying asset moves in your favor, changes in implied volatility can reduce or eliminate profits.
6. Assignment Risk
Holders of short option positions (particularly uncovered calls) may be assigned at any time, requiring the delivery or purchase of the underlying asset at an unfavorable price7. Complexity
Options strategies can be complex and require a clear understanding of the mechanics, including the interaction between strike price, underlying asset price, expiration, and Greeks (delta, theta, gamma, vega). Misunderstanding these elements may result in unintended outcomes.
8. Tax Considerations
Options trading may have complicated tax consequences. Investors are encouraged to consult a qualified tax advisor regarding the tax implications of specific strategies.
9. Regulatory and Operational Risks
Trading platforms may experience outages, delays, or errors. Regulatory changes can also impact the availability and terms of certain options products.
________________________________________
Acknowledgment: By participating in options trading, you confirm that you understand the risks involved and have reviewed this disclosure. You are encouraged to consult with a financial advisor or professional before initiating any options trading activity.

US options trading hours are typically the same as regular US stock market hours. Typically, most equity and ETF options are available to trade 9:30am to 4pm ET, Monday through Friday (excluding holidays and early market closes). Please note that that Tradesk currently does not permit after-hours options trading, and options can only be traded during regular market hours. Also keep in mind that certain options, such as broad-based indexes and certain ETFs, trade until 4:15 PM ET.

On the day of expiration:
You can trade options before 3:00pm ET. No new positions can be opened after 3:00pm ET, however you can still close your positions before market close at 4:00pm ET.

Options Trading Risk Disclosure
Important Notice: Please Read Carefully
Trading in options involves substantial risk and is not suitable for every investor. Before engaging in options trading, you should carefully consider your financial situation, investment experience, and risk tolerance. By participating in options trading, you acknowledge and accept the risks outlined below:
1. Market Risk
Options are subject to the same market forces that affect other securities, including fluctuations in price due to economic conditions, company performance, and geopolitical events. The value of an option may decline, resulting in a total loss of the premium paid.
2. Leverage Risk
Options provide leverage, allowing investors to control a large position with a relatively small amount of capital. While this can amplify gains, it also significantly increases the potential for loss, including the possibility of losing more than the initial investment in certain strategies (e.g., naked calls).
3. Time Decay
Options are wasting assets, meaning they lose value as they approach expiration. This time decay can erode the premium paid for the option, even if the underlying asset remains favorable.
4. Liquidity Risk
Not all options are actively traded. Lack of liquidity may make it difficult to enter or exit positions at desirable prices, potentially resulting in unfavorable trades or inability to close a position before expiration.
5. Volatility Risk
Sudden and unpredictable changes in volatility can have a significant impact on option pricing. Even if the underlying asset moves in your favor, changes in implied volatility can reduce or eliminate profits.
6. Assignment Risk
Holders of short option positions (particularly uncovered calls) may be assigned at any time, requiring the delivery or purchase of the underlying asset at an unfavorable price7. Complexity
Options strategies can be complex and require a clear understanding of the mechanics, including the interaction between strike price, underlying asset price, expiration, and Greeks (delta, theta, gamma, vega). Misunderstanding these elements may result in unintended outcomes.
8. Tax Considerations
Options trading may have complicated tax consequences. Investors are encouraged to consult a qualified tax advisor regarding the tax implications of specific strategies.
9. Regulatory and Operational Risks
Trading platforms may experience outages, delays, or errors. Regulatory changes can also impact the availability and terms of certain options products.
________________________________________
Acknowledgment: By participating in options trading, you confirm that you understand the risks involved and have reviewed this disclosure. You are encouraged to consult with a financial advisor or professional before initiating any options trading activity.