How To Buy A Put From the Chart of Underlying (Limit Order)
Buying a put affords the buyer the option (but not the obligation) to sell 100 shares of the stock at the selected strike price. This option extends from the purchase date to the selected expiration date. Below are the steps to place a limit order from the chart to buy a put option.
1. Click the Opt (options) button at the bottom of the price pane to open the Option Strategies menu
2. Select Long Put from the Menu
Alternately, click the Buy button and choose Buy to Open Put from the drop down menu
This places the On-Chart Order Ticket at the left of the chart with the fields pre-filled based on the user-defined default option buy ticket.
The order ticket contains:
- Contract details (action, date, option type, strike price, premium)
- Expiration dates (dropdown and grid)
- Order type
- Order price (premium)
- Spread (natural-far)
- OCA button
- Conditional order menu
- Cost of trade
If no changes are desired, simply click Buy to Open Put and confirm to place the order.
3. Select Expiration Date
Change the expiration date either to closer or further dates using the arrows
Alternately, select a specific expiration date from the drop down menu
4. View available strike prices with the limit price line
Click and drag the Limit line between the available strike prices for the selected expiration date. These are represented by the hash marks at the left of the P&L Zones. Simply stop at the desired strike for the contract.
5. Select the order type desired for the contract
Either leave the order set on Limit, or select a different order type desired from the drop down menu.
6. Set a Limit Price (optional)
The Limit slider shows the spread between the natural (in this case, the ask) and the far (in this case, the bid). To set a price within the spread at which to place your order, click at any point on the slider. The limit value is seen in the price field next to the "Lmt" order type.
The limit price can also be set by the spinner next to the limit value.
7. Use a Step to Limit order (optional)
Another way to take advantage of the spread is the Step to Limit order. Choose the Step to Limit order from the drop down menu.
Set the beginning of the slider at the limit price desired for the initial order. This will be the limit price at which the order will be entered.
Optional: you can also select any point within the spread at which you want the Step-to order to stop modifying.
Over the predetermined time period the limit price will be automatically modified up from the initial entry price toward the Natural (or selected) price. The step limit order will attempt to secure a preferable fill price in this process. Modification stops if no preferable fill is received and the limit price reaches the Natural. Note: a Step-to-Market order can also be used to allow the order to be modified through the spread and then out to the market price to fill.
8. Set the quantity
Select the number of contracts for the order. (Note: remember a single option contract normally controls 100 shares of stock.)
9. Set the duration (time-in-force) for the order
10. Submit the order
Click Buy to Open Put
Click Place Order to confirm and submit
The trading tools work on either a LIVE brokerage account or a PAPER (simulated) trading account. Live market trading requires an account with TC2000 Brokerage (www.TC2000Brokerage.com).