How to Find Options to Trade: Step-by-step Guide

Learning how to find options to trade comes down to a repeatable process. You define your goal, understand the contract, set your risk limits, screen for liquid underlying stocks, and then evaluate specific contracts on the options chain before you commit a dollar. Most beginners skip straight to the last step, scroll through a chain, and pick whatever looks cheap. That is how accounts get drained. In this step-by-step guide, we’ll walk you through the full workflow a disciplined trader uses. You’ll learn which filters matter, which numbers on the chain deserve your attention, and how to match a contract to your plan instead of forcing a plan onto a contract. Treat each step as a checkpoint.

Step 1: What’s Your Goal with Options Trading in the First Place?

Your goal decides which strategies are even on the table. Before you screen a single ticker, you need to know whether you’re trying to generate income, hedge existing holdings, or speculate on a directional move.

Ask yourself one honest question: why do you want to trade options? The answer filters out most of the market instantly. An income-focused trader has no business hunting for cheap weekly lottery tickets, and a speculator doesn’t need to study collars.

• Income: Selling covered calls against shares you own, or selling cash-secured puts on stocks you’d be willing to buy.
• Hedging: Buying protective puts or building a collar to cap downside on a stock you already hold.
• Speculation: Buying calls or puts to express a directional view with defined risk.

Each goal has its own payoff shape. Here is one common strategy for each, drawn on the same hypothetical $100 stock.

Your goals will shift as your account and experience grow. Reassess every quarter or so, and adjust your approach when your objective changes.

Step 2: What Basics Do You Need Before You Start Searching?

You need to understand calls, puts, strike prices, expiration dates, and the underlying asset. If any of those terms feel fuzzy, pause here and start with what stock options are before moving on.

A call gives the buyer the right to buy the underlying at the strike price on or before expiration. A put gives the buyer the right to sell the underlying at the strike price on or before expiration. Standard U.S. equity options typically control 100 shares per contract.

The strike price is the fixed price in the contract. The expiration date is the last day the option can be exercised. The underlying is the stock, ETF, or index the option is based on. For a solid neutral primer, Investor.gov’s options overview is worth a read.

Here is how those pieces read on a single hypothetical quote.

Step 3: How Do Risk Tolerance and Time Horizon Narrow the Field?

Your risk tolerance and time horizon tell you which expirations and strategies you can actually handle. A trader who can’t stomach watching a contract drop 50% in a day should not be buying short-dated, out-of-the-money options.

Short-term traders often focus on higher-volatility names and nearer expirations, which move fast in both directions. Traders with a longer view usually prefer expirations 45 days or more out, which decay more slowly and give a thesis room to play out.

Time decay is not a straight line. An at the money option loses value slowly at first and fastest in its final weeks, so the last 30 days cost far more than the first 30.

Options carry more risk than simply owning shares, largely because of leverage and time decay. Decide your maximum loss per trade before you look at a chain. Many disciplined traders cap any single idea at 1% to 2% of their account.

Step 4: Which Strategies Should You Learn First?

Once you know your goal and risk limits, match them to a strategy. Build real understanding of two or three strategies before you add more. Books, structured courses, and broker paper-trading accounts all help you practice without risking capital.

Step 5: How Do You Use Screening Tools to Find Option Candidates?

Screening tools filter thousands of tickers down to a short list of stocks worth analyzing. You screen the underlying stock first, because a great contract on a bad setup is still a bad trade.

The same principles behind finding stocks to trade apply here, with a few options-specific filters layered on. If you’re new to the tools themselves, our guide to using trading scanners covers how they work.

Filters worth starting with:

1. Average stock volume: Liquid stocks usually have liquid options. Many traders start with names trading over 1 million shares a day.
2. Options volume: Look for active option trading, not just active share trading.
3. Price range: Mid-priced stocks often have more affordable contracts and strikes spaced closely enough to be useful.
4. Technical setup: Clear trend, breakout, or pullback to a defined level. No setup, no trade.
5. Catalysts: Know when earnings and major events land, because they move implied volatility sharply.

Take the names that pass and build a watchlist. A focused list of 10 to 20 tickers you know well beats a list of 200 you barely understand.

Step 6: How Do You Evaluate a Contract and Choose a Reliable Broker?

A reliable broker gives you a clean options chain, fast fills, fair fees, and solid risk tools. Look for real-time Greeks, an easy multi-leg order ticket, a paper-trading mode, and transparent per-contract pricing.

Your broker will also require options approval levels. Beginners are usually approved for covered calls and long options first, with spreads and uncovered strategies unlocked later.

Once your platform is set, open the chain for a watchlist stock. If you need a refresher, here’s how to read an options chain column by column.

Your contract checklist:

• Bid/ask spread: Tight spreads mean you lose less just getting in and out. A few cents wide is healthy. Wide spreads are a hidden cost.
• Open interest and volume: Checking open interest tells you whether other traders are active at that strike.
• Expiration: Give your thesis enough time. Running out of time is one of the most common ways right-direction trades still lose.
• Strike: Match moneyness to your conviction and budget. Learn how to pick the right strike price for different setups.
• Implied volatility: Compare current IV to the stock’s recent range. Buying when IV is inflated means paying up for the option.

A Hypothetical Walkthrough

Here’s a hypothetical example to tie it together. Say a stock on your watchlist trades at $100 and has pulled back to a level that held twice before. Your goal is a defined-risk bullish trade, and your maximum risk is $300.

You open the chain and look at expirations about 45 days out. The $100 call shows a bid of $3.90 and an ask of $4.00, with open interest in the thousands. The $110 call is cheaper but has a $0.40-wide spread and only a few dozen contracts of open interest.

The at-the-money contract costs about $400, which exceeds your $300 limit. So you might look at a slightly out-of-the-money strike like the $103 call, confirm the spread and open interest are still healthy, and verify that the breakeven (strike plus premium) sits at a price the stock can realistically reach before expiration. Every number here is hypothetical, but the logic is exactly how you should evaluate a real chain.

Here is that walkthrough laid out on one chain, with the cost and breakeven of every strike.

Here is the whole process on one card, in the order you run it.

How Can Pure Power Picks Help You Find Options to Trade?

Pure Power Picks shares educational chart setups and options ideas so you can see this process applied in real market conditions. Each alert shows the underlying, the contract, and the alerted price at the time of publication, along with the reasoning behind the setup.

The goal is not to hand you something to copy blindly. It’s to help you recognize the patterns, filters, and contract-selection logic behind each idea, so you build your own judgment over time.

You still make every decision. You decide whether an idea fits your goal, your risk limit, and your broker’s approval level, and you size it accordingly. For a broader foundation, Investopedia’s options guide is a helpful companion resource.

Frequently Asked Questions

What is the fastest way to find options to trade?

Start with a stock screener filtered for high share volume and active options volume, then narrow the results to names with a clear technical setup. From there, check the chain for tight spreads and healthy open interest. Speed comes from having a repeatable process, not from skipping steps.

How much open interest is enough?

There’s no universal cutoff, but many traders prefer strikes with at least several hundred contracts of open interest and meaningful daily volume. Combine it with the bid/ask spread. Low open interest and a wide spread together are a strong signal to move on.

Should beginners trade weekly options?

Weekly options decay quickly and punish small timing errors, which makes them harder for newer traders. Many beginners find expirations 30 to 60 days out more forgiving while they learn. Once you understand theta and gamma, you can decide whether shorter expirations fit your style.

Is a cheaper option a better deal?

Not necessarily. Cheap options are usually far out of the money and need a large move just to reach breakeven. Judge a contract by whether it fits your setup, timeframe, and risk limit, not by its sticker price.

Do I need a lot of money to start trading options?

You can buy a single contract for less than it costs to buy 100 shares, but small accounts make proper risk management harder. Start with paper trading, then trade small with money you can afford to lose. Protecting your capital while you learn matters more than account size.

PPP Team

Stock and Options Research and Education

The PPP Team is the research and editorial team behind Pure Power Picks. We trade stocks and options and publish the work as we do it, with every alert tracked in public. Publishing since 2020. How we research and correct our work is written out in our editorial standards. Our content is strictly educational, never advice.

Disclaimer: The information provided by Pure Power Picks is for educational and informational purposes only and should not be considered financial, investment, or trading advice. We are not registered financial advisors. All examples in this article are hypothetical and are provided for illustration only. Options trading involves substantial risk and is not suitable for every investor. You can lose some or all of your invested capital. Past performance, including any referenced historical data points, does not guarantee future results. Always conduct your own research and consult a licensed financial professional before making any investment decisions.