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Your First Trade

This guide will walk you through executing your first options trade using FITools. We’ll use a conservative covered call strategy as an example.

Before You Start

Section titled “Before You Start”

Prerequisites

Section titled “Prerequisites”
  • Account setup completed and broker connected
  • Options approval from your broker
  • 100 shares of a stock you own
  • Understanding of covered call basics
Section titled “Recommended Preparation”
  1. Complete the platform tour
  2. Read about covered calls
  3. Practice with paper trading first
  4. Start small with your initial trades

Step 1: Navigate to Strategy Builder

Section titled “Step 1: Navigate to Strategy Builder”
  1. Log into your FITools account
  2. Click on “Strategy Builder” in the main navigation
  3. Select “Covered Call” from the strategy templates
  4. Choose the stock you want to trade from your holdings

Step 2: Set Up Your Trade

Section titled “Step 2: Set Up Your Trade”

Select Your Stock

Section titled “Select Your Stock”
  • Choose from your current holdings
  • Review the stock’s recent performance
  • Check upcoming earnings dates
  • Verify you own at least 100 shares

Choose Strike Price

Section titled “Choose Strike Price”
  • Out-of-the-money calls are typically safer for beginners
  • Select a strike 5-10% above current stock price
  • Consider your willingness to sell at that price

Pick Expiration Date

Section titled “Pick Expiration Date”
  • 30-45 days is common for covered calls
  • Avoid weeks with earnings announcements
  • Monthly options typically have more liquidity

Step 3: Analyze the Trade

Section titled “Step 3: Analyze the Trade”

Review Key Metrics

Section titled “Review Key Metrics”
  • Premium: How much you’ll receive
  • Breakeven: Stock price where you break even
  • Max profit: Maximum potential gain
  • Max loss: Maximum potential loss
  • Probability: Chance of profit

Risk Assessment

Section titled “Risk Assessment”
  • Portfolio impact: How this affects your overall risk
  • Downside protection: Premium provides some cushion
  • Upside limitation: Cap on potential gains

Step 4: Execute the Trade

Section titled “Step 4: Execute the Trade”

Review Order Details

Section titled “Review Order Details”
  • Strategy: Covered call
  • Underlying: Stock symbol
  • Strike: Strike price
  • Expiration: Expiration date
  • Quantity: Number of contracts
  • Order type: Market or limit

Place the Order

Section titled “Place the Order”
  1. Click “Review Order”
  2. Verify all details are correct
  3. Check your buying power
  4. Submit the order
  5. Monitor for fill confirmation

Step 5: Monitor Your Position

Section titled “Step 5: Monitor Your Position”

Initial Setup

Section titled “Initial Setup”
  • Set alerts for significant price movements
  • Monitor the option’s value daily
  • Track time decay (theta)
  • Watch for early assignment risk

Ongoing Management

Section titled “Ongoing Management”
  • Review position weekly
  • Consider rolling if necessary
  • Plan for expiration scenarios
  • Adjust alerts as needed

Common Scenarios

Section titled “Common Scenarios”

Scenario 1: Stock Stays Below Strike 🟢 Conservative Risk

Section titled “Scenario 1: Stock Stays Below Strike ”
  • Option expires worthless
  • You keep the premium
  • Your shares remain in your account
  • Result: Profit from premium

Scenario 2: Stock Rises Above Strike 🟡 Moderate Risk

Section titled “Scenario 2: Stock Rises Above Strike ”
  • Option gets exercised
  • You sell your shares at strike price
  • You keep the premium
  • Result: Profit from premium + stock appreciation

Scenario 3: Stock Declines 🟡 Moderate Risk

Section titled “Scenario 3: Stock Declines ”
  • Option expires worthless
  • You keep the premium
  • Your shares lose value
  • Result: Loss partially offset by premium

Exit Strategies

Section titled “Exit Strategies”

Buy to Close

Section titled “Buy to Close”
  • When: Option becomes very cheap (90% profit)
  • Why: Lock in most of the profit
  • How: Buy back the option you sold

Let It Expire

Section titled “Let It Expire”
  • When: Option is out-of-the-money near expiration
  • Why: Keep the entire premium
  • How: Do nothing, let it expire worthless

Accept Assignment

Section titled “Accept Assignment”
  • When: Option is in-the-money at expiration
  • Why: You were willing to sell at that price
  • How: Your shares are automatically sold

Troubleshooting

Section titled “Troubleshooting”

Order Not Filling

Section titled “Order Not Filling”
  • Check bid-ask spread
  • Adjust limit price
  • Consider market hours
  • Verify sufficient shares

Unexpected Assignment

Section titled “Unexpected Assignment”
  • Early assignment can occur
  • Dividend dates increase risk
  • In-the-money options have higher risk
  • Contact support if confused

Learning from Your First Trade

Section titled “Learning from Your First Trade”

Track Performance

Section titled “Track Performance”
  • Document the trade details
  • Note what worked well
  • Identify areas for improvement
  • Calculate actual returns

Analyze Results

Section titled “Analyze Results”
  • Compare to expectations
  • Review market conditions
  • Assess timing decisions
  • Plan future improvements

Next Steps

Section titled “Next Steps”

After your first trade:

  1. Analyze the results thoroughly
  2. Continue with small position sizes
  3. Learn about other strategies
  4. Practice with different market conditions
  5. Build your options knowledge gradually

Advanced Features

Section titled “Advanced Features”

Portfolio Integration

Section titled “Portfolio Integration”
  • View how the trade affects overall portfolio
  • Monitor correlation with other positions
  • Track cumulative performance
  • Assess risk concentration

Alert System

Section titled “Alert System”
  • Price alerts for underlying stock
  • Volatility alerts for unusual activity
  • Time decay alerts as expiration approaches
  • Assignment alerts for in-the-money options

Common Mistakes to Avoid

Section titled “Common Mistakes to Avoid”

Getting Help

Section titled “Getting Help”

If you need assistance:

  • Use the in-app help system
  • Contact customer support
  • Review educational materials
  • Consider working with a financial advisor

Remember

Section titled “Remember”

Your first trade is a learning experience. Focus on:

  • Understanding the mechanics
  • Following your plan
  • Managing risk appropriately
  • Learning from the outcome