Placing an Advanced Options Order

Get a quick overview of Advanced Option Trading in StreetSmart.com® in this Advanced Options training module.

Instructions for placing an advanced options order vary depending on how you use the Strategy Filter to find pairings. Use Strategy Filter if you want to use one of the available strategies to identify options pairings. If you already know which contracts you wish to pair in the order, select Custom from within the Strategy Filter .

1. Enter a symbol in the Underlying field.
2. Click Get Spreads to display an initial list of paired contracts based on the default Strategy Variable.
   
   Custom will only show pairings between the two options specified (or an equity and an option if an equity symbol is loaded into Leg 1). If you are placing a Custom order, you may skip to step 7 as custom orders do not have any additional variables to set up.
3. Select a Strategy from the drop-down menu. There are several to choose from, each with their own risks and variables, so you should review the information about each, starting with the Advanced Options Overview, before placing trades. The Strategies available are based on your options approval level.
   The Strategies available are based on your options approval level.
   The Strategy Variables and pairings available will automatically change when you select a different strategy. For the Rollout strategy, the Roll fields allow you to select a specific position or define what expiration, strike, or contract type pairings to display.
4. Select the specific expiration month or choose Near to display pairings for the current month, and the next available expiration month. For time spreads (Calendars or Rollouts) Leg 2’s expiration date will need to be later than Leg 1’s. Check Include Wkly/Qtrly to include options with non-standard expirations in the Expiration dropdown.
    

   Rollout	Exp Leg 1 is the expiration month for the option position you wish to Close and Exp Leg 2 is the month for the position you wish to Open.
   Calendar Spread	Exp Leg 1 is the near expiration month and Exp Leg 2 is the far expiration month.

5. Select the Spread Width, which will show you potential trades where the difference between the two contract prices is equivalent to the strike range you specify. (Applies to Collar, Combo, Strangle, Straddle, Vertical, Calendar and Ratio Spread orders.)
    

   Vertical Spread

   Select the Spread Width, which will show you potential spread trades where the range between the two contract strike prices is equivalent to the spread range you specify.

6. Select Display to determine how many parings you would like view.
    

   Collar / Straddle /  Strangle

   Select whether you want to view combinations that are Around the Money, Above the Money, Below the Money, or to see all at once, leave the default All Money.

7. Now that all the variables are selected, click on the pairing for which you wish to place the order. This will load the legs into the order settings below.
   
   Note the Net column to determine whether the trade is a net debit or net credit type of pairing. Those with a 0.00 net are Even. If there are no price indications in this column, then one or both legs does not have a current quote.
   
   Please Note: The strategy prices are theoretical values based on the disseminated prices of the individual legs, and may not be available at the time the order is sent to the exchange.
   
   
8. Select an Action, if applicable: Open to place a Sell to Open and Buy to Open; Close to place a Sell to Close and Buy to Close. (Applies to Collar, Combo, Strangle, Straddle, Vertical, Calendar and Ratio Spread orders.)
9. Enter the number of contracts for the order in the Contract Qty field. This quantity represents the number of contracts representing each leg. For example: if placing a Buy Write order for XYZ you would enter 10 which represents 1000 shares of XYZ and 10 contracts of  XYZ calls. If 10 was entered for a Straddle you would be sending an order for 10 calls and 10 puts.
   
   

Ratio Spread

The quantities of the two legs must be in a 2:1 ratio. Change the quantity of the Leg 1 and the Leg 2 quantity will change accordingly.

10. The Type field will indicate whether you selected a Debit, Credit, Even, or Market order type from the pairing results.
     

    TIP:  The Net for a debit or credit consists of the ask price of the leg being bought and the bid price of the leg being sold. The net is the difference between debit of the purchased leg and the credit of the sold leg.

     

    Buy Write-Unwind / Sell Write-Unwind	You will need to select the price indication from the Debit side, and when closing (Unwind), select from the Credit side. Note: In some cases a credit could be displayed for opening transactions and a debit for closing transactions.
    Straddle	The net is the total of the two bid prices of the options being sold (bid) or the total of the two ask prices of the options being bought (ask).

11. Ensure that the Price at which you wish to send the order is correct. When you have selected a pair from the results it will default to the Net value of the Net you selected, but you may enter a different price or use the arrows to select a new price.
12. Select the Time in Force:  GTC (Good 'til Canceled: Order will remain live until it fills, is rejected, or is canceled) or Day (order will remain live during the current trading session only).
13. Enter the number of contracts you wish to trade. You may also check the AON (All or None), which will ensure that your order will only fill if the entire quantity is available for your order.
     

    Buy Write-Unwind / Sell Write-Unwind

    Remember the quantity represents 100 shares of the underlying stock, and 1 option contract. Adjusted contracts are not included.

14. To send the order, click Verify Order or if you have Order Verification turned off, click Place Order. If you have order verification enabled, a second window will open allowing you to review your order a final time before sending. Click Ok when you have verified the order details.

Commissions, taxes, and transaction costs are not included in any of these strategy discussions, but can affect final outcome and should be considered. Please contact a tax advisor to discuss the tax implications of these strategies. Many of the strategies described herein require the use of a margin account. With long options, investors may lose 100% of funds invested. In-the-money long puts need to be closed out prior to expiration, since exercising them could create short stock positions.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Multiple leg options strategies will involve multiple commissions. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Member SIPC