Not all stocks are good for options trading. The best stocks have high liquidity, tight spreads, and enough volatility to make trading worthwhile. Here is what to look for and some popular choices.
What Makes a Good Stock for Options?
- High options volume: More volume means tighter bid-ask spreads and easier fills
- Tight spreads: The difference between bid and ask should be small
- Good price range: $50 to $200 is often ideal - not too cheap, not too expensive
- Enough volatility: Some movement is needed to make options trading worthwhile
- Weekly options available: More expiration choices for flexibility
Key rule: Always check the bid-ask spread before trading. If the spread is wide, you are losing money on entry and exit.
Popular Stocks for Options Trading
ETFs (Most Liquid)
SPY - S&P 500 ETF
The most liquid options in the world. Extremely tight spreads, multiple expirations daily. Perfect for beginners.
QQQ - Nasdaq 100 ETF
Tech-heavy ETF with excellent liquidity. Great for trading the tech sector without single-stock risk.
IWM - Russell 2000 ETF
Small-cap exposure. Good liquidity and often more volatile than SPY.
Tech Stocks
AAPL - Apple
Extremely liquid options. Good price range and consistent movement. A staple for options traders.
NVDA - Nvidia
High volatility and volume. Popular for directional trades. Can be more volatile during earnings.
AMD - Advanced Micro Devices
Good liquidity and moderate price. Often moves with the semiconductor sector.
MSFT - Microsoft
Large, liquid, and less volatile than other tech names. Good for premium selling strategies.
Other Popular Choices
TSLA - Tesla
High volatility, high premium. Popular but can be risky. Great for experienced traders.
META - Meta Platforms
Good liquidity and regular movement. Responds well to tech sector trends.
AMZN - Amazon
Liquid options, though the high price means larger capital requirements.
Stocks to Avoid for Options
- Low volume stocks: Wide spreads eat into your profits
- Penny stocks: Options often do not exist or are illiquid
- Stocks with earnings soon: Unless that is your strategy, IV is elevated
- Unfamiliar names: Stick to stocks you understand
How to Check Liquidity
- Look at the option's volume and open interest
- Check the bid-ask spread - under $0.05 is ideal
- See if weekly options are available
- Look at the stock's average daily volume
Track Your Options Trades
Pro Trader Dashboard tracks all your trades across different stocks. See which ones work best for you.
Summary
The best stocks for options have high volume, tight spreads, and enough movement to be worth trading. Start with liquid ETFs like SPY and QQQ, then branch into individual stocks like AAPL or NVDA. Always check liquidity before entering a trade.
Learn more about credit spreads or how to pick strike prices.