Basic Module 4 – Brokerage Basics

Open a virtual trading account to practice what you pick up in each module

Introduction / Learning Outcomes:

Kevin Cook and Jared Levy lead you through the basics of option brokers. During this series of videos Kevin and Jared will describe what to look for in a broker, the different types of market orders, how to interpret a bid-ask spread and what type of order is appropriate and finally a checklist of questions to ask your broker. Specifically, you shall learn:

1. What to look for in an options broker.
2. The brokers’ duties.
3. The different features of an options broker.
4. What a broker is.
5. The different types of accounts.
6. Why there are so many different options exchanges.
7. How to use the National Best-Bid or Offer.
8. The regulating bodies of options brokers.
9. How to open an account.
10. What minimum account size means to a broker.
11. How a commissions rate impacts your decision.
12. How to get educated on options.
13. Understand the different options trading levels.
14. Understand how clearance level impacts what you are allowed to trade.
15. Understand the different types of order types.
16. Understand when options traders will use a market order and why it’s the cheapest.
17. Understand when an options trader will use a limit order and how it may never get filled.
18. Understand how a stop loss is a trigger order.
19. Differentiate between a stop loss and a stop limit.
20. Why a trailing stop is like a ratchet.
21. Why an OCO order is like a bracket order.
22. Additional order qualifiers.
23. Tricks and tips of the bid-ask spread.
24. A checklist of questions for your broker.

Recommended Exercises:

1. Contact two different options brokers.
2. Create records of each options broker.
3. Ask each broker if they have a dedicated options desk.
4. Ask each broker what their commission rates are.
5. Ask each broker what the minimum account size is.
6. Ask each broker starting options clearance.
7. Ask each broker how experienced they are with options.
8. Watch ONN.tv for education.
9. Determine your appropriate options trading level for each broker.
10. Differentiate between a market order, a limit order, a stop ‘loss’, stop ‘limit’, a trailing stop or orders cancel orders.
11. Describe how a limit order would give you a partial fill.
12. Describe a trigger which would generate a trigger order.
13. Find an option with a high bid-ask spread.
14. Determine which type of order is best for a high bid-ask spread.
15. Find an option with a low bid-ask spread.
16. Determine which type of order is best for a low bid-ask spread.