Options Trading: Trade the Haystack NOT the Needle

Tom Gentile

Posted in
Education

By: Tom Gentile
January 24th, 2023

3 mins read

I teach what I do and the process I follow in options trading is three-fold.  1) Spot the Opportunity. 2) Crete an acceptable risk options trade and then 3) Manage that trade for profit or loss.

This educational piece is going to discuss a concept in accomplishing number 1 – spotting an opportunity.

The opportunity is the stock or the ETF I want to then execute an options trade on.

There are tons of optionable securities to choose from.  How does one even choose which one to consider trading options on?  Start with the Overall market indexes, Dow Jones Industrial Average, NASDAQ and S&P 500 and then look further into the sectors of the markets, like Technology, Healthcare, Energy etc.

Sector Search

One website I like to use is www.sectorspdr.com. Check out that website and you will se a means to track which of the 11 S&P 500 Sector ETF’s knowing if they are trading higher or lower over multiple time frames.

Figure 1: Top part of www.sectorspdr.com website
Figure 1: Top part of www.sectorspdr.com website

On this page find the Select Sector SPDR Tools:

Figure 2: Select Sector SPDR Tools
Figure 2: Select Sector SPDR Tools

Click on that button and it will allow you to search up sector performance of the 11 ETF’s and see which ones are performing the best from best at the top to worst at the bottom.

Select the time frame you want, and it will adjust the list ranking.

To the right of this search tool is the list of the stocks in that sector ETF.

Click on a symbol from the list of ETF’s to bring up the list of stock for each on that right side of the site.

One can also type in a symbol in the search window at the top of the page, click Go and a page will populate for that specific ETF.

Picking the Stock?  How about Picking the ETF?

When you are looking over the list of stocks and trying to decide if you know the company or want to click on each to find out more about them why not make that tedious process less burdensome?

You see, each ETF is a basket of all the stocks chosen to represent that sector of the market.

It can seem like you are trying to find the needle in the haystack that you deem will be the best opportunity out of all those listed.

Again, that can be burdensome and time consuming.

Why not just consider trading the ETF itself?  Or consider trading options on the ETF?

The ETF is the ‘HAYSTACK’.  Most of these, if not all the Sector SODR ETF’s are optionable.
Consider researching with this site which ETF’s are showing the best performance over the time frame you want and then, instead of trying to find that one stock (needle) in that ETF (Haystack), consider the appropriate options strategy on the ETF / haystack itself.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.