First, if you missed this morning’s Opening Playbook session, check out the stream above for a ton of actionable, action-packed info, analysis and trade ideas!
When it comes to options trading, stock selection is just as important as the strategy itself. The wrong stock can leave you stuck in illiquid trades with bad fills, while the right stock can set you up for consistent wins.
If you want to maximize your chances of success, here’s what to look for.
Liquidity and Strike Prices Matter
One of the biggest mistakes new options traders make is picking stocks with low liquidity. If a stock has low volume in its options chain, you’ll struggle to get in and out at a fair price. That’s why I stick to stocks with tight bid-ask spreads and open interest above 500 contracts on the strikes I’m trading.
Large-cap stocks tend to have the most liquid options. Companies like Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT) see millions of contracts traded daily, which makes them ideal for strategies like the wrap order. More liquidity means better fills, less slippage and a higher probability of success.
Another factor to consider is how a stock’s strike prices are structured. Stocks with wide strike gaps — like $5 or $10 increments — make it harder to execute options spreads with precision. For most strategies, you want stocks with $1 or $2.50 strikes, which give you more flexibility in choosing your risk-to-reward setup.
Expensive stocks with weekly options also provide an edge. Take Eli Lilly (LLY), which trades above $900 a share. Despite its high price, you can trade its options for a fraction of that cost — especially with my favorite Wrap Orders! And because its options have tight spreads, you don’t need a big move to hit a 100% return.
Trade With the Trend
A strong stock in a strong uptrend gives you the best shot at success. That’s why I use technical indicators to filter stocks before entering a trade. If a stock is above its 50-day and 200-day moving averages, that’s a good sign. If it’s breaking out on strong volume, even better.
I also pay attention to sector strength. If the overall market is weak but Health Care (XLV) is holding up, I’ll focus on stocks within that sector. The same goes for Technology (XLK), Consumer Discretionary (XLY) and other high-momentum areas.
At the end of the day, options trading is about stacking the odds in your favor. Pick stocks with high liquidity, tight spreads and strong trends, and you’ll put yourself in the best position to win.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Leverage the Market’s ‘Rush Hour’ for Next-Day Payouts!
When closing-hour liquidity floods the market between 3-4 p.m. ET…
Some traders are cashing in on this timeframe to target next-day payouts on a specific kind of trade…
