Option alerts can alert you on price fluctuations, upcoming expirations, and in-the-money (ITM) and out-of-the-money (OTM) changes.

Let’s review TradeSmith’s options alerts: 

• Trailing Stop (on the options trade)
• Price (on the options trade)
• Option Cost Basis (for Naked Put and Covered Call option trades)
• Underlying Stock
• • Fixed Price Above/Below on Underlying Stock
  • Percentage Trailing Stop on Underlying Stock
• Time Value/Expiry

Trailing Stop

You can set up a trailing stop on your options trade by entering your preferred trailing stop percentage on the Trailing Stop tab (1). VQ trailing stops are not available for Option positions and will be greyed out (2), but can be set on the Underlying Stock only.

The Trailing stop will start tracking from your entry date, however, if no entry date is available, the alert will start from the date the alert was added. The start date of your Trailing Stop alert can be edited by clicking the pencil icon (3).

Price

You can utilize any of the Price alerts for your options trades - Breakout alerts, Percentage Gain/Loss, Fixed Price Equal or Above/Below, or Dollar Gain/Loss.

Our Percentage Gain/Loss target alert is a simple exit strategy. These alerts will notify you when the trade has met a percentage gain or loss so you can exit it.

By default, Percentage Gain/Loss and Dollar Gain/Loss alerts are based on the intraday Latest Price for your options trades; however, you can click “Show notification settings” to change this to Latest Close instead (1).

Option Cost Basis

Option cost basis alerts are intended for two types of options trades: naked puts and covered calls. These alerts allow you to be alerted when the price of the underlying equity moves above or below your overall cost basis in the option trade.

• Naked Put Cost Basis: monitors the underlying stock's price below or above the cost basis of the option trade.

For naked put positions, the cost basis of your position is the strike price of the put minus the premium per share you were paid for selling the put. This alert type is ONLY active for short put positions.

Example: If you sold a put with a $50 strike price and you received $1 for selling the put, then your cost basis is $49. If you set a “latest close is 25% below cost basis” alert, we will alert you when the underlying stock falls to $36.75 (25% below the cost basis of $49). 

• Covered Call Cost Basis: monitors the underlying stock's price below or above the cost basis of the option trade.  

For covered call positions, the cost basis is the amount you paid for the underlying stock minus the premium you received for selling the call. You will need to enter the entry price that you paid for the underlying stock (1). This alert type is ONLY active for short call positions.

Example: If you purchased a stock for $50/share and received $1 for selling a covered call on it, then your cost basis is $49. If you set a “latest close is 25% below cost basis” alert, we will alert you when the underlying stock falls to $36.75 (25% below cost basis).

Underlying Stock

Underlying stock alerts operate in the same way as our regular stock alerts but they are associated with your option, so there is no need to enter the stock separately to track its performance in the market. 

• Fixed Price Above/Below on Underlying Stock: monitors the latest price above/below a specific price on the underlying stock.

The fixed price above/below on the underlying stock can notify you of the breakeven price (or a price just outside your breakeven price) to determine if the option is moving against you.

• Percentage Trailing Stop tracks the percent below the highest point of closing profitability since the position's entry date.

This alert can be adjusted for Short and Long positions (1).  A Long trailing stop will alert you when the price of the underlying stock falls below it's high since your entry date while a Short trailing stop will alert you when the price of the underlying stock rises above it's low since your entry date.

You can utilize the stock’s Volatility Quotient (VQ) as the trailing stop (2) as we are tracking the underlying stock.

The Trailing stop will start tracking from your entry date, however, if no entry date is available, the alert will start from the date the alert was added. The start date of your Trailing Stop alert can be edited by clicking the pencil icon (3)

Time Value/Expiry

One component affecting an option's price is the time left before the option expires. As the expiration date approaches, the time value component of the option decreases — sometimes rapidly.

• Percentage Time Value (1): monitors a specific percent of the option’s initial time value.
• Dollar Time Value (2): monitors a specific dollar amount of the option’s initial time value.
• Expiry (2): monitors the specific number of days before the option expires.