Back in the day before computers and electronic trade execution, options were the realm of professional traders. Floor traders screamed out numbers and used hand signals in an open-outcry system to trade options amongst other professional traders.
To place a trade from anywhere outside the trading floor was a harrowing experience. Here’s an example of how an options trade was filled over the phone…
A customer calls their broker to place an order… the broker calls in the order to the phone clerk on the trading floor… the phone clerk hands the order to a runner… the runner literally runs the order to the floor broker… the floor trader asks for the market and trades the order…
And we’re not done yet!
The floor broker hands the filled order back to the runner… the runner runs the completed order back to the phone clerk… the phone clerk calls the broker to tell them the order is filled and at what price… the retail broker calls the customer to let them know the order is filled and at what price.
Whew! That’s a lot of work to place trade.
Thankfully, new technology has simplified the process.
Today, most options exchanges use a hybrid of an open-outcry and fully electronic exchanges . The combination of electronic exchanges and online option brokers allows traders to directly interact with traders on the floor or have their trades executed by the exchange electronically.
You can simply login to your online brokers account on your computer or mobile device. Then you enter your trade. The order is electronically filled… and a confirmation is sent back to your computer.
The whole process takes seconds…
Now in order to trade options online you’ll need a broker.
A simple search on Google will give you plenty of reputable options.
Also, Barron’s publishes a list every year of the top online options brokers.
Now that you know a little about how online options trading works, your next job is to find a strategy that truly works!
For more information on that, take a look around the site. And be sure to subscribe to our free daily newsletter, Options Trading Research!
Category: Options Trading Basics
About the Author (Author Profile)
Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.