Top 5 Stock for Trading Options - Report

Options can be intimidating for new traders. Especially in times like these, with inflation and interest rates rising, tech stocks dropping, and oil and gas prices on a rollercoaster. Many don’t know where to start. But they don’t have to be. That’s why, in this guide, I’ll show you:

What options are…
How to trade them, no matter what’s happening in the markets…
My 5-point system for what makes a stock great for trading options…
And my top 5 stocks for trading options.

I’ve also added a special bonus, my Options Trading Checklist, to the bottom of this page. Before you place your first trade I recommend going through that 10-point checklist to be sure you’re putting your best foot forward for success.

Now, for those of you who don’t know me, I’m Jay Soloff.

I’ve spent over 20 years in the financial markets as a floor trader, an options market maker, a hedge fund analyst, and now a professional options educator.

Frankly, I don’t believe anyone knows more about options than the “invisible hand” pulling the strings behind the market. That was me – the market maker, or “Mr. Options” as one multi-million-dollar portfolio manager called me.

I want you to know where I come from so you have a sense of how I might look at the market a little different from your average so-called “options expert.” (There’s a lot of amateurs out there posing as “gurus.”)

We’ll get started now with the basics, and feel free to skip ahead if you’re an old pro.

So, first things first…

What is an option?

An option is a contract that allows its buyer the opportunity (but no obligation) to buy or sell a stock at a particular price – the “strike price.”

A “call option” is a bet that a stock will rise in price. It allows its holder to buy the stock at the “strike price” within the specified time-frame (before expiration).

A “put option” is a bet that a stock will fall in price. It allows its holder to sell the asset at its “strike price” before expiration.

Options offer a high-leverage tool for speculating on expected price movements.

If you’re a beginner, check out my Extra Cash Masterclass for Options. In that comprehensive video training you’ll learn:

The little-known equation that reveals when a stock is ‘mispriced.’
The #1 option trade to protect your portfolio if the market tanks tomorrow
How to buy a call and a put in 5 minutes
The ‘crystal ball’ indicator to signal the chances you make money or not
My LIVE trade of Apple stock right in front of you

I’ll even show you how to make up to $1,135 extra every month, from scratch – as well as give you the opportunity for weekly option trade ideas vetted by me. Click here to learn more.

How do I get started and place my first trade?

If you already have a stock account but are not trading options, you can use the account you already have to trade options.

If you don’t have an online brokerage account, you may want to choose one that has low fees for trading options. Many now offer commission-free stock trading and low-fee options trading. When you trade cheap options, which are my favorite kind, you especially want to watch the fees.

For more on how to trade cheap options and turn that into potentially hundreds of dollars – one of my favorite options strategies – take a look at: How You Could Turn “Extra Cash” Lying Around Your House into Thousands of Dollars in as Little as 23 Days.

I don’t offer broker recommendations but a simple internet search should give you lots of easy options.

Once your account is set up (should be easy), on many brokerages you’ll navigate to the “Trade” tab and drop down to “Options.” You should find information on the various levels and an application for approval.

Apply to trade options. Level 1 will suffice for our type of trading and approval is easy at this level.

So now that you are ready to trade…

How do I choose an option?

Start with choosing a stock.

To choose a stock I start with my 5-point Options Floor Trader Pro criteria.

Affordability: First off, we want the options to be affordable. Options trading is something that should be done with “extra cash” you have lying around. So I look for stock priced at less than $50 per share. To learn more about this, click here.
Catalyst: I’m looking for a stock likely to move. If a stock doesn’t move, we’re not going to make any money on the option. In fact, you’re more likely to lose money due to eroding time value. So we want to know there is a catalyst that will cause the stock price to move (e.g. higher inflation will be good for this company’s sales).
Low Option Price Volatility: Current prices of the options should be relatively low on a volatility basis so that there is more upside if volatility picks up.
Liquidity: Options in the stock should be liquid in order to keep bid/ask spreads narrow (and allow us to get close to mid-market prices). When lots of people trade an option there is a natural market for it – if very few people are trading options on a particular stock, a market maker has to take the other side and then you are paying too much for the option.
Market Cap: We’re looking for stocks with a market cap of at least $1 billion (also helps with liquidity).

So, now you know:

What options are …
How to place an options trade …
My five criteria for choosing which stock to trade options on …

So here’s the main event – what you signed up for.

My Favorite 5 Stocks to Trade Options On

1: Snap Inc (NYSE: SNAP)

What it is: Social media company with over 300 million active users.
Affordability: SNAP’s stock is priced below $50 a share at the time of this writing.
Catalyst: Social media firms are still figuring out how to fully monetize their user base, so plenty of upside.
Volatility: SNAP tends to be volatile enough to provide directional opportunity, but not too volatile to where the options are too expensive (plus the stock price is right around $50).
Liquidity: The popularity of social media stocks means they tend to be very liquid.
Market Cap: $77 billion.

2: Intel Corporation (NASDAQ: INTC)

What it is: Chipmaker giant in good shape with the backlog demand for chips due to the global supply chain bottleneck.
Affordability: INTC’s share price is around $50.
Catalyst: The company is spinning off its self-driving car unit (Mobileye), which could be a major catalyst for the share price.
Volatility: Relatively low volatility, making the options affordable.
Liquidity: INTC has plenty of liquidity as one of the largest semiconductor companies in the world.
Market Cap: $200+ billion

3: United States Steel Corp (NYSE: X)

What it is: A U.S. steel producer out of Pittsburgh.
Affordability: X’s stock trades around $20 per share.
Catalyst: Domestic steel is in high demand due to Covid supply challenges and China trade challenges.
Volatility: X can be volatile but at around $20 a share, the options aren’t expensive.
Liquidity: As one of the largest steel producers in the U.S., X options have plenty of liquidity.
Market Cap: $6 billion.

4: Plug Power Inc: (NASDAQ: PLUG)

What it is: PLUG makes hydrogen fuel cell vehicles, and unlike many in this space, actually has revenues.
Affordability: PLUG’s share price is around $32 as of this writing.
Catalyst: PLUG benefits from current intense investor and consumer interest in alternative fuel vehicles and hydrogen fuel cells in particular are proving more cost effective in the long run.
Volatility: It can be a volatile stock, but the price in the $30s helps keep the options prices at reasonable levels.
Liquidity: Hydrogen fuel cell stocks are very liquid due to popularity.
Market Cap: $18.5 billion

5: Tilray, Inc. (NASDAQ: TLRY)

What it is: One of the original cannabis stocks to become popular.
Affordability: TLRY stock trades at less than $10.
Catalyst: The potential for nationwide legalization could give a major boost to the industry.
Volatility: Has potential for outsized returns if the stock becomes volatile (was $67 at one point last year).
Liquidity: As one of the original pot stocks, the stock is well-known. Since it is well-known and cheap, TLRY options are liquid.
Market Cap: around $4 billion.

So there you have it – my 5 best stocks for trading options.

But knowledge without action does not make for fast profits (or any profits)!

So it’s time to hunker down for an hour, set up your account if you don’t already have one, and place your first trade.

If you don’t know how to get started, don’t worry. I highly recommend every trader, new and old alike, take a look at my Extra Cash Masterclass for Options. You’ll not only learn the finer points of trading options – you’ll get ongoing support and trade recommendations from me. Click here to learn more.

And remember, you’re not flying blind – as promised, here’s my fast-action bonus: The 10-Step Options Trading Checklist Every Trader Needs.