Digging for New Stock and Options Trading Ideas

Finding new trading ideas is hard work. Here is a list of five simple and helpful tips to help you identify options trading opportunities.
Kirk Du Plessis
Sep 23, 2021
3 min read
Digging for New Stock and Options Trading Ideas

I’m constantly looking for the “low hanging fruit” when it comes to stock and options trading. I don’t want the trades that I have to over analyze and look at 100+ times over to confirm something. There are hundreds of securities to trade and we want the easy trades right?

High probability trading is what I try to find because they are the trading set ups that are “most likely” to make you money. Again, I didn’t say 100% or anything close to that. Trading for a living is about winning on a consistent basis.

Normal distribution standard deviation

But I know how hard it can be to dig for new ideas, so here are 5 tips to help you get started. As always, it’s best to have some sort of a system in place to keep you accountable.

1. Choose High Volume Stocks

Quit the penny stock stuff – it doesn’t work long term and it is not consistent. Take that long list of stocks you look at each day and narrow it down to 20-40 stocks that have a lot of trading volume and liquidity. If there is light volume on the stock then there is bound to be light volume on the options.

I prefer the indexes and the major ETFs.

2. What Stands Out?

Below are two charts. Which one stands out more to you? The second one, of course! The huge move in the stock screams opportunity. Depending on your analysis this could be a great trade for multiple reasons. The first chart is a stock that isn’t moving and likely has minimal options activity.

Stock with minimal movement
Stock with a lot of upward movement

Again, look for the low hanging fruit. What jumps out of the screen and begs you to analyze it more? This can help really narrow your trading down.

3. Momentum Indicators

Stochastics, MACD, Volume, Moving Averages, and RSI all play a key role when deciding on a new trade. The basket of indicators you choose, whether lagging or leading, may depend on where you get your education. Try to keep it simple when first starting out; using too many indicators in the beginning is a ticket to the land of big losses.

RSI

Get very comfortable using one or two indicators first, and then add more indicators slowly.

4. Fundamental Analysis

Yes, I said to do some “basic” fundamental analysis. Where is the company going? What news has come out that could affect it? Are earnings coming up soon? What about the industry or sector? There are so many questions to ask but the main idea here is just to get a general idea of what’s going on outside the charts. If you are trying to buy calls on a stock that just announced a major layoff or poor earnings then you are in for some big losses.

Sometimes a little homework now can save you thousands over time.

5. Set Up Price Alerts

One of the most underutilized services of most brokerage platforms are price alerts. Why wait around for a stock to get down to $50 or whatever when you can have an alert sent out.

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