Trading a Call Spread Using the Option Chain

Study Notes:

The Option Chain, available on the IBKR GlobalTrader app, allows the investor to create multi-leg strategies, view expirations, calls, puts, and each strike available to trade in a clearly defined, user-friendly screen. Through the GlobalTrader, the investor has access to over 30 market centers to trade options.

The investor can access the Option Chain by choosing a symbol in the Watchlist, Portfolio, or Explore screen and tapping on the Options icon in the bottom right-hand corner. The Investor can also tap on the blue Trade icon in the lower right-hand corner of any screen, tap on Options and type a symbol or the name of a company into the search bar.

For a detailed description of the display, please refer to the accompanying Option Chain video. This lesson will focus on the call spread.

To create a call spread, the investor chooses whether they want to buy or sell the first leg and selects calls by tapping on the toggles. Once selected, the Option Chain will populate with the prices and option data for each available strike in the expiration. Select the strike by tapping on the row and an option information screen will appear that will let the investor either create an order or add the leg to a multi-leg strategy.

The investor can also see the Performance Profile of the option showing the max loss, breakeven point, and the max return, the implied market probability of profit, as well as the Greek values for Delta, Gamma, Theta, and Vega and if applicable the next ex-dividend date is at the bottom of the page.

For this example, the investor chooses to add to a strategy by tapping on the Add to Strategy icon. The investor will return to the option chain to select another strike. The investor can choose another expiration, whether they want to buy or sell, and between calls and puts.

For a vertical call spread, the investor will choose sell and select a different strike than the first leg. When ready, the investor taps the button in the bottom right-hand corner that shows the number of legs and they will be brought to the Performance Profile screen for the spread. The investor can adjust the ratio of each leg by tapping on the plus or minus sign and the Performance Profile will adjust for the new ratio. For this example, the investor will leave the ratio at 1×1 for each leg.

When ready, the investor taps the Create Order button at the bottom right-hand side of the screen and will be taken to the order ticket screen and then can set the order type choosing between limit, market, or stop. Notice when order type is selected, a definition appears of each type available.  Next, set the price, quantity, and time in force. When clicked, a definition of a day order and Good ’Til Cancel order are shown for the investor.

When ready, the investor can expand the Performance Profile to see data from the prior screen, tap the Preview button to see an order preview and the effect on margin if applicable, or slide the button in the lower left-hand side to submit the order.

The investor will be notified if the order is filled immediately, or they can monitor its status by tapping on the Transaction icon in the Home screen.

Investors can find more information on Options and Option Strategies on the Interactive Brokers website under education at the Traders’ Academy Options section.

Resources

IBKR GlobalTrader

Traders’ Academy – Options Trading Courses