Top Stocks for Options Trading in 2023: A Comprehensive Guide
While the top stocks for options trading differ from investor to investor, there’s a good reason a select few get traded far more often.
We can’t tell what the best options trading stocks are for reaching your investment goals, but we can help you understand how to make better decisions and give you some of our top picks for 2024.
What Makes a Good Options Trading Stock?
When trading options, the ideal candidates are stocks with high liquidity and volatility. Open interest and high trade volumes make entering and exiting a position easy.
Other things to look out for include stocks with diverse ranges of expiration dates and strike prices, providing you with more flexibility. If you’re new to options, we’ll cover the basics below. If not, feel free to jump to our list of the seven best stocks for options trading in 2024.
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Trading Options 101: A Brief Overview
Purchasing an option is purchasing a contract, giving the owner the right to buy and sell a certain asset at a set price (strike price) within a certain period (expiration date). You don’t buy and sell the underlying asset, and it’s not uncommon to let options expire without taking any action.
Basically, when you deal with options contracts, you’re betting that the stock price won’t surpass the strike price. The income comes from charging a premium when selling the contract in the future.
Trading options is great for investors who want to take an active role in investing while maintaining a high level of flexibility. However, not all options make for good investments — in most cases, the best trade options are highly active and liquid.
7 Best Stocks for Options Trading in 2024
While new investors tend to focus on stocks because they’re easy to understand, buying and selling options have distinct advantages. So, as you gain experience investing in stocks, trading options is a great next step. But, options trading requires a different strategy than buying and selling stocks.
These seven companies are some of our favorites for trading options — they have enough unpredictability to create market changes without being volatile enough to bring substantial risks.
- Apple (AAPL)
It’s hard to beat Apple in terms of robust market options and liquidity. Millions of shares get bought and sold daily, meaning finding buyers and sellers is typically fast and simple.
What makes Apple such a potentially amazing option is the tech giant’s volatility during product launches, which can result in profitable option premiums. Plus, if you understand Apple’s event-driven price moves and cyclical nature, there are even better odds to see substantial premiums.
With Apple, you can make calculated bets because of its predictability. For example, the company typically releases its new iPhone line in September and usually sees a boost in revenue during the holidays.
- Tesla (TSLA)
There’s no doubting the high volatility of Tesla; you can see massive returns or massive losses. The EV market is inherently volatile; paired with Elon’s frequent updates and changes, trading Tesla options is like a playground for investors who are confident in managing risk and seizing opportunities.
Tesla’s options market is extremely robust — you can see massive price changes daily. While it raises the risks, it also brings the opportunity for fortune.
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- Microsoft (MSFT)
Similar to Apple, Microsoft is a highly liquid market for trading options. As a leader in tech stocks, you can find options with weekly or monthly expiration dates, meaning there are plentiful choices for investors. Because institutional and retail traders both go after MSFT stocks, liquidity isn’t really a concern for Microsoft options.
With cloud computing taking the world by storm, its cloud service (Azure) impacts the company’s stocks substantially. Therefore, earning results and new news about Azure can cause significant swings in stock prices, creating the perfect environment for making options plays.
- Netflix (NFLX)
Even with recent changes, Netflix remains a behemoth in the streaming world and is a prime options trading candidate. Netflix focuses on growing its number of subscribers, meaning that its stock is more volatile than usual during earnings season; prices can skyrocket or plunge depending on the numbers, making it a high-risk, high-reward option for traders.
Its highly liquid stock comes with a wide range of strike prices, and with more companies offering streaming services, big news from Netflix or its competitors can lead to a lucrative landscape for trading options.
- Nvidia (NVDA)
If you want to trade options in the tech sector, don’t overlook Nvidia. Although known for its GPUs, Nvidia has hands in everything tech, from AI to gaming. This diverse catalog brings volatility with plenty of options strategies.
These options come with various expiration dates and strike prices and are highly liquid. Nvidia is always making waves in the industry, opening the door to plenty of options trading catalysts. Nvidia’s moves are often unpredictable, but with the right strategy, investors can capitalize on this unpredictability.
- Alphabet (GOOGL)
The tech giant behind Google — Alphabet — offers high liquidity, while its ever-evolving business model brings the right amount of volatility to make options plays. There are plenty of catalysts to keep investors interested in GOOGL, whether it’s the company’s advertising business, AI capabilities, cloud computing software, or anything in between.
Alphabet has a vast options market with a wide array of strike prices and varying expiration dates. And because of the company’s involvement with different industries and tech sectors, diversification isn’t an issue.
- Meta Platforms (META)
Formerly known as Facebook, Meta’s focus on the “metaverse” brought volatility to the company’s stock and opened up many avenues for options traders. You can’t turn on the news without hearing something about Meta; there are many catalysts involved in this already volatile option.
Because of Meta’s constant news flow and massive market cap, its options are extremely liquid. Investors can ride the volatility waves from Meta’s consistent updates and changes.
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The companies we discussed above are great starting points for options traders, balancing volatility, liquidity, and extensive markets. But there are plenty of other stocks that can be great for options trading.
If you want to seek out alternative options, consider the business’s nature, current market conditions, and historical volatility. Learn how Tibilio can help here.
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