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#Thinkorswim options how to

Successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions change continuously. The paperMoney® trading application is for educational purposes only. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. Not investment advice, or a recommendation of any security, strategy, or account type.īe sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. You never know, thinkBack may be that hidden gem that takes your options trading to the next level.Ĭontent intended for educational/informational purposes only. As with most things, the more you use it, the quicker you’ll be able to get the information you want from it. Getting comfortable with thinkBack requires a lot of practice. Of course, past performance doesn’t necessarily indicate future results, but an informed trader may be better able to navigate the world of options-and thinkBack is a great tool to help you learn. When backtesting your options trades, you can compare strategies, run different entry/exit scenarios, and get a better understanding of options. The thinkBack tool can be a time saver compared with waiting for each options paper trade to unfold in real time on paperMoney®. Past performance does not guarantee future results. The yellow line displays the P&L for the trade. You can also view the P&L of your simulated trades graphically. The example in figure 1 displays a vertical spread.įIGURE 2: A VISUAL GLANCE. You can also create multi-leg options trades on thinkBack. For example, for a long call, select the ask price of a call option on the thinkBack option chain for a short put, select the bid price of a put option. In the example in figure 1, notice the historic 2020 options are available to trade. When you enter a past date, the options price will adjust so you’ll see options that were available on that date. Some traders may refer to a chart to do technical analysis of the underlying stock, but you can use whatever you typically do to determine entry points.

The profit or loss for the trade is displayed in the P/L Open field in the lower right of the page.

In figure 1, the P&L date is -think of this as the date you’re exiting the options trade.

In the field labeled P/L Date, enter the date you want to determine profit or loss for the trade.

Enter the entry date for the simulated trade.

Enter the symbol of the underlying stock in the symbol box (top left).

Select the Analyze tab on thinkorswim (see figure 1).

With thinkBack, you can view historical options prices, practice virtual trades using various options strategies, and determine P&L scenarios. The thinkBack tool on the thinkorswim platform gives you the opportunity to backtest options. This could make determining a hypothetical profit or loss on a past trade more difficult. To complicate matters more, options trades may be made up of various legs that together make up a specific strategy. So, using the stock chart could end up being insufficient. However, the price that displays on a stock chart doesn’t tell you how an option is performing. Option traders sometimes refer to the chart of an underlying stock for entry and exit signals. But for options trades, the process can be more difficult. Backtesting Options with Benefitsįor stocks, backtesting is relatively straightforward. It may not guarantee future results, but this type of backtesting can help you evaluate the efficacy of certain trading rules or strategies. Taking this approach seriously could help in deciding specific entry and exit points and determining an outcome for past simulated trades. Yet, looking back in time and running “what-if” scenarios can be a valuable part of a trader’s practice. When it comes to the stock market, history may not repeat itself.

Know the different ways to view P&L for simulated trades.

#Thinkorswim options how to

Learn how to use the thinkBack tool in thinkorswim® to backtest options strategiesĭetermine various profit and loss (P&L) scenarios and see simulated trades play out