Best Stock Options To Buy Now
Options trading is not for novices, but for seasoned investors who want to add another dimension to their portfolios, hedge against risk, limit downside losses or take big chances in the pursuit of outsized gains, options offer a lot of, well, options.
best stock options to buy now
While only you can determine the best option trading stocks for your individual investment strategy, you only stand to benefit from understanding why the securities with the highest options volume are as popular as they are.
With a market cap of more than $2.5 trillion, Apple is the biggest company in America. Traditionally, that level of size and stability makes a company an unlikely candidate for options trading, but Apple is actually more than twice as volatile as the market average.
This ETF tracks the Russell 2000 index, known as the small caps. Unlike the large-cap giants with 12- and even 13-figure market capitalizations, small-cap stocks are known for the kind of high volatility that options traders crave.
The U.S. government has taken steps to prevent AMD from exporting its most advanced and sophisticated chips to China, sparking the kind of wild volatility that options traders love to bet for and against.
Tesla has been trading with high levels of implied volatility. That means that options traders expect major price swings in one direction or the other in the near future. Part of the reason for all of that implied volatility might be due to Elon Musk, its unpredictable and controversial leader, whose ongoing battle with Twitter has triggered major ups and downs in Tesla stock as of late.
Netflix spent years as a Wall Street golden child on a pedestal with Facebook, Apple, Amazon and Google as one of the vaunted FAANG stocks. But stiff competition, subscriber dropoffs and internal controversy led to steep declines. Today, according to Nasdaq, Netflix is trading with some of the highest implied volatility in the entire options market.
Those underlying assets are typically 100 shares of stock, but options contracts can be written for just about any asset class, including commodities, bonds and currency. Different investors use options for different reasons, like to hedge against market downturns, for income or as a speculative bet made in pursuit of large gains.
However, some strategies, like uncovered short calls, expose options traders to the potential for unlimited losses. When you purchase options as a long call, on the other hand, the potential for gains is unlimited, but the maximum loss is limited to the premium paid.
Also trading to the upside today is Advance Auto Parts Inc. (AAP + $2.16 to $120.77) after Barclay's upgraded the auto parts retailer to "Equal Weight" from "Underweight" while lowering their price target on the stock to $129.00 from $140.00. Analysts at Barclay's remain cautious about the company's fundamentals but believe that AAP's roughly 18% drop in 2023 has skewed the risk/reward dynamics. Calls are outnumbering puts 2:1, but the September 15th 110.00 put is the highest volume contract (volume is 100).
Also trading to the downside today is Generac Holdings Inc. (GNRC - $4.76 to $107.20) after Bank of America Global Research (BofA) downgraded the maker of power generation equipment to "Underperform" from "Neutral" and cut their price target on the stock to $91.00 from $141.00. Analysts at BofA cited concerns around dealer inventories and has concerns over the company hitting street earnings estimates. Calls and puts are trading roughly even with the June 16th 85.00 put being the highest volume contract (volume is 1,195).
Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Supporting documentation for any claims or statistical information is available upon request.
All references to subjects (securities, indexes, futures contracts, and options contracts) were derived based on screens conducted by the writer for certain anomalous activity such as volumes, volatility and other related market data. As needed for brevity, the writer may have applied discretion when choosing among screen outputs for inclusion. Such discretion may have been based on news reports or other considerations of public interest. The views or opinions are those of the writer, and are subject to change without notice. All referenced subjects were chosen for illustrative purposes only and should not be considered recommendations, offers to sell, or solicitations of offers to purchase.
If the stock is above $33.01 at expiration, it is in-the-money, has value, and will be subject to auto-exercise. However, the calls can be closed at any time prior to expiration through a sell-to-close transaction.
New investors tend to focus on buying and selling stocks. These types of trades are straightforward and easy to understand. However, there are distinct advantages to buying and selling options. As investors gain experience, many begin to explore options-related opportunities.
These companies are often listed as the best stocks for trading options, because they are just unpredictable enough to create some suspense without being so volatile that the risks far outweigh potential rewards.
The reason flooring is of interest to options traders is the cyclical nature of the industry. When economic news is good, residential and commercial properties get flooring upgrades. When times are tight, new flooring moves down the list of priorities. That sort of volatility increases options-related opportunities.
These stocks are a good starting point for options traders in search of just the right level of volatility. However, this list is by no means exhaustive. As you seek out alternative stocks, consider the nature of the business, historical volatility, and market conditions that are likely to impact future ups and downs in share prices.
While high volatility can provoke anxiety among those who rely on share gains to deliver portfolio returns, it has the opposite effect for options traders. Volatility creates the conditions in which those who buy and sell options can turn impressive profits.
This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.
ESOs differ from exchange-traded or listed options in many ways. As they are not traded, their value is not easy to ascertain. Unlike listed options, ESOs do not have standardized specifications or automatic exercise. Counterparty risk and concentration risk are two risks of which ESO holders should be cognizant."}},"@type": "Question","name": "Are ESOs Worthless at First?","acceptedAnswer": "@type": "Answer","text": "Although ESOs have no intrinsic value at option grant, it would be naïve to assume that they are worthless. Because of their lengthy time to expiration compared to listed options, ESOs have a significant amount of time value that should not be frittered away through early exercise.","@type": "Question","name": "What Are the Tax Implications of Receiving Employee Stock Options?","acceptedAnswer": "@type": "Answer","text": "While the option grant is not a taxable event, taxation begins at the time of exercise and the sale of acquired stock also triggers another taxable event. Tax payable at the time of exercise is a major deterrent against early exercise of ESOs.Despite the large tax liability and loss of time value incurred through early exercise, it may be justified in certain cases, such as when cashflow is needed, portfolio diversification is required, the stock or market outlook is deteriorating, or stock needs to be delivered for a hedging strategy using calls."]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsWhat Is an Employee Stock Option?Understanding ESOsImportant ConceptsESOs and TaxationIntrinsic vs. Time Value for ESOsESOs vs. Listed OptionsValuation and Pricing IssuesRisk and RewardHolding ESOs Until ExpirationEarly or Premature ExerciseBasic Hedging Strategies for ESOsEmployee Stock Options FAQsThe Bottom LineCareersSalaries & CompensationEmployee Stock Options (ESOs): A Complete GuideByElvis Picardo Full Bio LinkedIn Elvis Picardo is a regular contributor to Investopedia and has 25+ years of experience as a portfolio manager with diverse capital markets experience.Learn about our editorial policiesUpdated October 12, 2022Reviewed byAndrew SchmidtFact checked byRyan Eichler Fact checked byRyan EichlerFull Bio LinkedIn Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.Learn about our editorial policies Investopedia / Sydney Saporito 041b061a72