Optionshouse Covered Call Demonstration by Tradecomparison

OptionsHouse is one of a few brokerage firms that allows prospective customers to sign up and test out their platform using a "Virtual Trading" account. The virtual trading software operates the same as it does with a full account, except of course that you're not using real money and the colors are slightly different. We'll be using a virtual trading account for this demonstration, and we encourage anyone considering OptionsHouse to open a virtual trading account so you can test-drive the software yourself. Before we jump into the demonstration, we have a few high-level observations about the OptionsHouse trading software that could impact your use of it. The OptionsHouse software makes extensive use of javascript. This means that the browser doesn't need to refresh each page, so the website feels "snappier" than plain html pages that have to be refreshed everytime you click on a link or press a button. The software will run in most any recent browser without the need to install any additional software. This is really nice to be able to use all the features of OptionsHouse from a friend's computer or from your work computer where you may not be able to install anything else. The OptionsHouse trading software will run on the iPhone, the iPad, and some other mobile browsers, though it will run much slower on those devices and it will also run slower on a much older computer. Finally, be aware that the OptionsHouse trading software won't run if javascript is disabled. OptionsHouse does have some alternative software for use on phones or other mobile devices, but we're not going to cover that here. OK, let's jump in and use the software. We believe one of the first things brokerage firm software should do is quickly get you to the place you want to be. For example, some vendors let you select a starting page when you login. OptionsHouse does not provide that option, but they still do a good job by automatically selecting and displaying the last account you viewed. The default account screen also shows you the summary information you would expect, such as the current account value and today’s profit or loss. If you want to change accounts, the account selection is made near the top-center of the screen. We should point out that the top-right corner of the screen contains some amount of account information which is displayed at all times, even when the lower pane of account information is not visible. In addition to remembering the last account you used, OptionsHouse also automatically displays the ticker and company or ETF that you viewed the last time you were logged into the website. That is a very small, but very nice feature that many other brokerage firms overlook. In addition to the bar of ticker & company information that is displayed at all times, OptionsHouse also provides a widget that shows similar information in a larger format. By default this is shown in the right sidebar, but it can be shown in other locations or moved into a window of its own. Since OptionsHouse automatically selected the last account you were using, they are able to display the all the open positions for that account in the center of the screen. At the bottom of the screen, OptionsHouse shows a list of orders, sorted such that the most recent order is at the top. We find it really nice to be able to see all this information immediately after logging in without having to make any other selections. When you want to change the company or ETF currently being displayed, OptionsHouse provides a nice, simple lookup directly from the main screen. This lookup is conveniently and consistently available in the upper-left area of the screen no matter whether you are looking at this page of account information or any other page. As the user types each character, the system returns a list matching either the ticker symbol or the company name. We wish the list had scrollbars or some way to let us see more than just the top-10 matches, but we still like the quick convenience of being able to lookup a company name without having to leave the current screen. OptionsHouse promotes a slightly different approach to creating trades than many of the other brokerage firms. Rather than starting the trading process by opening a blank order ticket, OptionsHouse promotes going directly to the security you want to trade and starting the process from there. We've already selected the underlying company or ETF to trade, so the next step for a trader wanting to sell a covered call is to look at the option chain. The option chain is accessed by clicking on the "Options" tab which is by default always accessible as the second tab across the top. If you do click on the small white icon on the right side of the tab, you can also choose to open the option chain in a separate window. This is really nice for users with larger monitors or multiple monitors to be able to see the option chain constantly updating in a separate window of its own. The option chain display can be customized to automatically show or hide special options such as weeklies. Our default settings have the weeklies being displayed, but we have clicked on the "plus/minus" sign to collapse the weekly series into a single row. Clicking on the plus or minus sign will cause any series of options to either expand or collapse. As we just mentioned, the display can also be customized to completely remove the display of weeklies or other special options for people who seldom or never trade them. We aren't going to go into all the preferences, but we will point out how to get to those preferences since it isn't immediately obvious. There is a small icon of "gears" above the option chain. Clicking on that will bring up the preferences window to control whether weeklies are displayed, how many strikes to display, and other preferences. Using the OptionsHouse software can be frustrating if you jump right in on your own without any tutorials and didn't know that little gear icon could let you set a lot of valuable preferences. To purchase the stock for the covered call, the user can simply click on the ask price for the stock or the small "B" button next to it. This brings up a selection to "Buy" the underlying, or select from a number of other actions. As you might expect after seeing this, clicking on the bid price, rather than the ask price, will bring up a selection to "Sell" the underlying. Clicking on the bid or ask price isn't very obvious for a new user, particularly compared to clicking on a very large button that says, "Buy" or "Sell". This makes the learning curve a bit steeper for OptionsHouse, but we did come to appreciate clicking on the bid or ask price, particularly in the option chain as you'll see in a moment. Selecting the action to buy the stock will cause the order ticket window to appear with the stock leg properly entered. After scanning the option chain for the call you wish to sell, the process for selling the covered call works in a manner similar to clicking on the stock's ask price to buy the stock. Simply click on the bid price of that call option to be presented with a similar selection that defaults to selling the particular option. Unfortunately you may need to move the order ticket window out of the way before you can click on the proper option. We find it quite annoying to have to move the option ticket out of the way, particularly when working on a small screen. It's certainly better than being completely taken away to a separate screen, but there must be a better way than having to move the order ticket out of the way. By selecting the sell action from the pop-up menu, the call option will be added to the order ticket. To complete the order, you need to select the price type for the order, typically either "market" or "limit". Next enter your desired price for the order. For this screenshot, we're switching to a different symbol with a wider spread to demonstrate something else. OptionsHouse displays the bid & ask price for each leg and a small but very useful graphic that shows your order price compared to the bid & ask prices for the order. In this example, when we entered the order price of $1.20 the blue triangle shows us that our price is roughly mid-market. That's really nice, but we think one small enhancement could help a lot. In this example with a wide spread, $1.30 is actually the mid-market price but it's not immediately obvious from the graphic that our $1.20 price is still slightly below the mid-market price. For this reason, we wish the mid-market price was explicitly labeled. That's certainly not a big deal in the grand scheme of things, and the graphic is still very helpful as it is. Unfortunately OptionsHouse has made the order duration rather useless for this specific trade. The selection for order "Duration" only allows us to select a "Day" order because OptionsHouse simply does not allow "Good 'til Cancel" orders on spreads which includes buy-writes like we're trying to do here. They do allow you to place "Good 'til Cancel" single-leg orders, but not spreads. Finally, we can set the number of spreads to trade. We like this since it's easier to say we simply want to trade 2 spreads rather than having to update the stock quantity to 200 and the option quantity to 2. Updating the stock & option quantities separately is extra work and has the potential to allow mistakes. After all the order ticket selections have been made, press the "Preview" button in the lower-right corner of the order ticket window. The preview/confirmation dialog will present the details of the order and show the impact on your buying power. Once you have confirmed that the details are correct, press the "Place Order" button. At this point it's usually beneficial to return to the main "Accounts" tab to inspect the order. The order itself will be displayed in the lower "Orders" panel. This will tell you whether the order is still open (waiting to be filled at your limit price), partially filled, or complete filled. Once the order has filled, you should see the results of your trade in the "Positions" panel in the middle of the page.