This tutorial explains how to place buy and sell orders related to shares of stocks and stock options utilizing the trading platform ThinkorSwim by TD Ameritrade. In particular, this article is focused on:
How to get your order filled;
Different types of orders and timing of the execution;
How to read the information related to the order;
How technically place an option or stock order in the ThinkorSwim trading platform.
By the end of this article, you should be aware of how easy is to place common orders related to stocks and options on your favorite brokerage firm.If this tutorial was helpful, you may find interesting also reading: How to Place Conditional Buy and Sell Orders – OCO and SEQ Orders.
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Understanding Options Trading Potential
Information to Provide to the Broker
When placing an order, there are several pieces of information to provide to the broker:
The side of the trade; are you buying or selling?
The symbol (ticker) you are interested in.
The expiration date (e.g. SEP, OCT, NOV, etc.).
The strike or strikes you want to trade.
The number of shares or contracts (when you trade options).
The type of order to place “Market order” or “Limit order”. In this second case, you must indicate the precise price at which you want to be filled. See below.
The timing of your order, also called “Time in Force – TIF”. You can choose amongst three different kinds of orders: “Day”, “Good-Til-Canceled – GTC” or “Extended Hours – EXT” orders.
Getting a Profit Either the Market Rises or Falls?
It is an order that will be surely executed, but it is not guaranteed the price at which it will be filled.
It is an order that guarantees the price at which it will be filled, but it is not sure that it will be executed.
It is an order that is valid only for the current trading day. It means that if the order is not filled during this time, then it will be cancelled at the end of the trading day.
Good-til-Canceled (GTC) Order
It is an order that is valid for the day in which is placed as well as the following days until it is either filled or cancelled.
Extended Hours – EXT Order
This kind of order is valid only for the current extended trading day.
How to Place an Order in the ThinkorSwim Trading Platform
Here I am going to describe in detail how to place a buy and sell order in ThinkorSwim, which is the brokerage firm that I personally use. However, I am pretty sure that the process represented below will have similarities with others trading platform.
Placing buy and sell orders in ThinkorSwim is very easy and versatile. The main way to do it, but as you become more confident with the platform you will see that there are also other ways, is to click on the “Trade Tab” in the left side corner of the platform. To begin, type in the symbol box up there the ticker or the stock symbol that you are interested in.
If for example, you want to look up at the Apple Computer Corporation, you should type in the ticker AAPL.
Once selected the ticker, several pieces of key information will appear below, under the word underlying.
Let’s quickly review what those information mean:
Last: last price at which AAPL was traded in.
Net Change: how much the price has changed from the previous session closing price.
Bid: highest price at which someone is willing to buy.
Ask: lowest price for which someone will sell.
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The difference between Bid and Ask is very important to understand in ThinkorSwim because it will generate buy orders by clicking on the ask price and sell orders by clicking on the bid price.
Size: It is always reported as a pair of numbers referring the first to the bid price and the second to the ask price. They represent the numbers of shares out of 100 that investors are ready to trade. If for example the size is 41 by 8, we know that there are 4100 shares available at that bid price and 800 available at the asking price.
Volume: number of shares traded daily.
Opening price: price at which the stock is traded at the opening bell.
High: highest price for the day.
Low: lowest price for the day.
Let us suppose now you want to buy 100 shares of Apple Corporation. Just left click on the asking price and a new section, called “Order Entry Tools”, will pop up down below. Your order will be highlighted in green indicating that is a buy one.
The order is made up of the following key pieces of information: side of the market, quantity, symbol, limit or market price, time in force (TIF). You can easily change any of the fields contained in the order. For instance, if you change the side from buy to sell the broker will change automatically the color of your order from green to red providing you a visual reminder of the different side of the order. You can also increase or decrease the number of shares by clicking up or down on the small arrows next to the quantity.
ThinkorSwim is counted by default with 100 shares each time, but you can change the default number by going into the setup menu on the right up corner of the platform and choose the “default stock order quantity” and also the “stock order quantity increment”.
How to Learn Stock Options Fast?…
The price field is set by default as a limited order (LMT). When you submit your order make sure that the LMT price closely matches the current asking price (this is a condition called a marketable limited order). If you have in mind a specific price, you can fix it by clicking on the little padlock contained in the price field or directly typing it in from the keyboard.
When the limited price is locked, that specific order can only be filled for the price you have set or for less, but never for a higher price. If the order is not filled by the end of the day it will be cancelled (the time in force – TIF – is set up by default as a day order).
If you would like to change the TIF from daily to the Good-til-Cancelled (GTC), you can easily select it by clicking on the TIF field. Now if the order is not filled at the set price today it will automatically renew itself for the following trading day session and will continue to do this until it is either filled or you cancel it. If you want to ensure that the trade is filled, you can go under the field “Order” and change it in a “Market Order”.
When all the above mention fields are set and the order is ready to be placed you have to click on “Confirmation and send”. Here, you get the “order confirmation dialogue” box where you can check the description of your order and its cost including commission.
If you like your order you can confirm it by clicking on “Send”, while if you would like to change any part you can click on “Edit” and go back to the previous screen. Once clicked on send, you will see how quickly a market order will be filled. Instead for a limited order you may wait some time depending on the price you have locked your order in. When the order is filled, a new dialogue box “Message Center” will pop up on the top left side of the platform with the summary of the information related to your order.
Flavian Barrett is a self-made stock option trader who is dedicated full time to options trading. He has spent several years mastering the art and science of advanced options strategies and concepts such as options pricing and volatility, greeks and time decay.
In his website www.FromZeroToOptions.com he shares tips, techniques, tutorials and insightful articles and resources options related.
If you want to get instructions on how to place the most rewarding options strategies from scratch! .. go to Options Strategies – The eBooks