Chapter 5: Steps to place your first options trade
You now have the core concepts, you know how to read the options chain, and you know what drives pricing. It is time to move to practice and learn the actual steps to place your first trade, from entry to a safe exit.
The six steps to place an options trade
Before you press the buy button on your platform, go through this checklist step by step:
| Step | Action required | Why do this? |
|---|---|---|
| 1. Pick the underlying (Underlying) | Pick large, highly liquid assets such as AAPL, SPY, QQQ, MSFT. | To make sure the spread between BID and the ask is very tight and you can exit immediately. |
| 2. Set your direction (Bias) | Expecting a rise? Buy a Call. Expecting a fall? Buy a Put. |
Choosing a direction makes sure you pick the right instrument for the move you expect. |
| 3. Pick the expiration date (DTE) | Pick a contract that expires in 30 to 45 days. | It gives the stock enough time to move your way without fast time decay (Theta). |
| 4. Pick the strike price (Strike) | Pick a contract with Delta between 0.40 and 0.50 (near the money). | A good balance between the chance the trade works and a reasonable premium cost. |
| 5. Place the trade with a limit order (Limit) | Set your price at the midpoint of the spread (Mid Price) between the bid and the ask. | To avoid slippage and get the best possible price without losing the spread right away. |
| 6. Plan your exit in advance | Set take profit at +50% and the stop loss at -50% or at the contract's maximum loss. | To take emotion out completely. The options market is volatile, and unrealized gains can vanish quickly. |
📝 A worked example of your first trade
Suppose you analyzed Apple (AAPL) and expect it to rise over the coming weeks:
- You open the chain and pick a contract that expires in 40 days.
- You look for a call with a strike that has a delta of 0.45 (for example, a strike of $190 while the stock trades at $188).
- You see that the Bid is $2.40 and the Ask is $2.60.
- Don't use a market order. Place a Limit Order at the mid price, which is $2.50 (actual cost per contract = $250).
- Once the trade is active, you immediately place an automatic order to sell the contract (take profit) if its price reaches $3.75 (50% gain), so you exit with a gain and peace of mind.
🛡️ Golden rules of risk management
Remember that trading is not a sprint. It is a long marathon. Follow these rules closely:
- The 2%-5% rule: never allocate more than 2% to 5% of your total portfolio to a single options trade. If your portfolio holds $10,000, one option contract should cost no more than $200 to $500.
- Learning comes first: don't overuse leverage at the start. Your first trades should work as hands-on practice to build confidence and experience.
🎓 Congratulations! You finished the beginner track
By finishing this chapter, you have taken a firm first step into professional options trading. You learned the difference between a call and a put, how contracts are priced, how time decay works, how to read the options chain, and how to place a trade with limited risk.
Your next step: the usual step after this track is to apply the six steps in a paper trading account (Paper Trading) for a few weeks before risking real money. Good luck on your trading journey.
