Options Trading Tools

The Smart Profits Report: Issue #213
Wednesday, June 1, 2005

Options Trading Tools: Six Key Tools for Trading Options
By Lee Lowell
Advisory Panelist, Mt. Vernon Research

When it comes to options, there’s no need to do all the work on your own, when there are plenty of tools and resources for options trading, right at your fingertips, that can make your job a lot easier.

I’m talking about the many free websites and fee-based vendors that save you time, trouble and headaches by allowing you to get quotes, place trades and check your order status - sometimes all in one spot.

Since I run my own trading business, I must use all real-time, professional-quality products, some of which are fee-based. Right now, for instance, I use eSignal as my data vendor for all of my stock, option, and commodity quotes. eSignal charges a monthly service fee as well as monthly real-time exchange fees.

But many great options trading tools are also free. Below is my recommended list of tools, some free, some not, that should provide just about everything you’ll need to trade options successfully.

Trading Tool #1: Free Quote Platforms

If you are looking for a free quote platform for stocks and indices, I highly recommend a software called Quotetracker.

QuoteTracker is a program that integrates with various datafeeds, brokers and financial sites to provide you with streaming real-time quotes, live intraday charts with technical indicators, Level II quotes, time and sales, alerts, news monitoring - and almost everything else you might need to effectively trade in today’s market.

The Quotetracker platform itself doesn’t give you the data-feed, but you can select one of the supported partners (which is just about every brokerage firm and data-feed vendor out there today) and trade through your own broker using QuoteTracker direct access interface.

So, if you trade through Optionsxpress, E*Trade, Scottrade, Schwab, TD Waterhouse, Fidelity, Ameritrade, etc., you’ll be able to get your quotes with Quotetracker. Even if you have a fee-based subscription to eSignal, IQFeed, or Interactivebrokers already, you can still use Quotetracker as a back-up platform.

Trading Tool #2: Online Options Brokers

There are many online options brokers available today. I haven’t tried them all, but I have personal trading accounts with Interactivebrokers, OptionsXpress and Schwab.

Interactivebrokers is a very sophisticated, high-end trading platform, geared toward the professional, active trader. They charge $1 per option contract, which is one of the lowest (if not the lowest) available out there for the retail customer.

OptionsXpress and Schwab both are competitively priced and serve most of the needs of an options trader.

A few others that I haven’t used personally, but have heard decent reviews about are CyberTrader, ThinkorSwim and TradeStation.

Trading Tool #3: Volatility Charts

Reading volatility helps you figure out which options are bargains, and which are not.

One of my favorite websites for useful options information is iVolatility.com. I use this site extensively in my own option analysis, and you’ve probably seen me reference this site before in previous articles.

iVolatility.com is an amazing site for volatility information, both historical and implied, and it helps me weed out stocks that have cheap and expensive options. Check out their volatility charts and option calculator.

Trading Tool #4: Tracking Software

When it comes to options software that tracks and graphs your positions, does what-if scenarios, and gives you basic help with options in general, there are a few sites I recommend:

The Options Industry Council’s main job is to get the word out to investors that options are available and useful for trading. They do not charge fees, and you can call them toll-free with any option question you have. They also offer free software called the “Options Investigator” on CD-ROM. Get it! And of course, here is THE source for all options information: The CBOE.

And here are some others that I’ve come across that are useful for setting up and tracking positions: Open Interest Options Browser, Option-Chart, and OptionVue Research.

These next few are good for Microsoft Excel users: Hoadley.net and OptionStar. Hoadley.net is a pretty intense and sophisticated options website for users of Excel. Give them a look.

If you need some scanners to help you find trades, here are a few that I’ve tried in the past. All have their advantages: PowerOpt, StockFetcher, MarketScreen and Trade-Ideas.

Options Trading Tool #5: The Web Sites

Let me round up here with a few more random websites that I’ve frequented that I feel can give you some more benefits to help with your trading and investing. These are in no particular order:

http://www.elitetrader.com
http://www.optionstrategist.com
http://finance.yahoo.com
http://www.sfomag.com
http://www.stockcharts.com
http://www.bigcharts.com
http://www.marketscreen.com
http://quotes.nasdaq.com/asp/MasterDataEntry.asp?page=holdingssummary
http://www.dogsofthedow.com
http://trader-source.com/forms/Signupform.htm

For more information on all of the above websites, you can click here to see our Recommended Options Website Listing.

Lots to look at. Have fun, and good trading,

Lee Lowell

Today’s Smart Profits Cribsheet

Check out the Smart Profits Glossary for definintions of terms like “Black-Scholes Model” or “volatility” found in today’s article.
Also, for further reading about helpful option websites, click on over to Smart Profits #217, The Chicago Board of Options Exchange: The Website Every Options Trader Should Know.

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