Options trading is not for novices, but for seasoned investors who want to add another dimension to their portfolios, hedge against risk, limit downside losses or take big chances in the pursuit of outsized gains, options offer a lot of, well, options.

                By                    Andrew Lisa
  • Best Stocks for Options Trading
  • Options vs. Stocks
  • Getting Rich
  • Which Is Best

Read: Looking To Diversify In A Bear Market? Consider These 6 Alternative Investments

While the best stocks for options trading will be different for every investor, there is a reason that some are traded far more heavily than others. If you’re considering entering the exciting world of options trading, keep reading to learn about the stocks that are experiencing some of the highest trading volume, as well as to get a better understanding of how options trading works and what you stand to gain and lose.

While only you can determine the best option trading stocks for your individual investment strategy, you only stand to benefit from understanding why the securities with the highest options volume are as popular as they are.

Which Stocks Are Best for Options Trading?

The following stocks have experienced the highest trading volume among options traders over the last 50 days.

1. SPDR S&P 500 ETF (SPY)

This exchange-traded fund tracks the Standard & Poor’s 500 index. The S&P 500 represents the 500 largest publicly traded U.S. companies and is the leading benchmark for the stock market as a whole. It’s the most heavily traded options stock by far because many options traders like to bet on the future performance of the stock market, in general, instead of the direction of just one company.

2. iShares Msci Emrg Mkts (EEM)

Emerging markets, and the companies that operate in them, are less stable and therefore more volatile than major corporations headquartered in wealthy developed countries. Companies that gain traction in developing markets have the potential for enormous gains, which is why they’re so popular, but they also pose a much greater risk. That’s why they deliver the high highs and low lows that options traders crave.

3. Invesco QQQ Trust (QQQ)

This ETF tracks the non-financial stocks on the Nasdaq 100, so it’s heavily weighted toward tech. The large-cap growth stocks in the tech sector are more volatile than the market as a whole.

4. iShares China Large-Cap (FXI)

According to Bloomberg, options traders have been betting big on Chinese stocks ever since the U.S. entered a bear market as part of a “risk-reversal” strategy. As U.S. equities declined, Chinese stocks proved to be resilient, which lured options traders looking to hedge their bets.

5. Apple (AAPL)

With a market cap of more than $2.5 trillion, Apple is the biggest company in America. Traditionally, that level of size and stability makes a company an unlikely candidate for options trading, but Apple is actually more than twice as volatile as the market average.

6. iShares Russell 2000 (IWM)

This ETF tracks the Russell 2000 index, known as the small caps. Unlike the large-cap giants with 12- and even 13-figure market capitalizations, small-cap stocks are known for the kind of high volatility that options traders crave.

7. Spdr S&P O&G Expl (XOP)

According to the U.S. Energy Information Administration, energy and fuel resources are much more volatile than other commodities because consumers can’t substitute them for alternative sources no matter how much prices fluctuate. Therefore, funds that track energy indices, like XOP, tend to experience sharp gains and steep losses, which naturally attract options traders.

8. Advanced Micro Devices (AMD)

The U.S. government has taken steps to prevent AMD from exporting its most advanced and sophisticated chips to China, sparking the kind of wild volatility that options traders love to bet for and against.

9. Tesla (TSLA)

Tesla has been trading with high levels of implied volatility. That means that options traders expect major price swings in one direction or the other in the near future. Part of the reason for all of that implied volatility might be due to Elon Musk, its unpredictable and controversial leader, whose ongoing battle with Twitter has triggered major ups and downs in Tesla stock as of late.

10. Netflix (NFLX)

11. Nvidia (NVDA)

Like AMD, Nvidia has recently experienced enormous price swings as its primary technology has fallen in the crosshairs of a trade war with China.

Is Options Trading Better Than Stocks?

Options are no better or worse than stocks, bonds, mutual funds, futures or cryptocurrency. They’re just another asset class that has a place in many investor portfolios. Because they derive their value from an underlying asset, options are classified as derivatives.

Those underlying assets are typically 100 shares of stock, but options contracts can be written for just about any asset class, including commodities, bonds and currency. Different investors use options for different reasons, like to hedge against market downturns, for income or as a speculative bet made in pursuit of large gains.

Options trading is no better or worse than investing in stocks, but it is different — and it comes with a different level of risk and potential for reward.

Can You Get Rich From Options Trading?

One of the reasons that options trading is so attractive is because there’s room for profit during times of volatility, no matter which direction the volatility moves. Options traders bet on the direction they believe a security, an index or the entire stock market will take in the future. It also gives them the flexibility to buy or sell the assets in a contract by the contract’s expiration date without obligating them to do so. 

You can get rich from trading options, but according to Merrill, most options investors use strategies that limit their risk but also limit their potential for gains.

However, some strategies, like uncovered short calls, expose options traders to the potential for unlimited losses. When you purchase options as a long call, on the other hand, the potential for gains is unlimited, but the maximum loss is limited to the premium paid.

Which Option is Best For Day Trading?

According to DayTrading.com, options were not typically a part of traditional intraday trading until recently. Now, however, day traders commonly incorporate options trading into their strategies.

It’s important to note that day trading, in general, is risky and carries the potential for fast and significant losses — adding options into the mix only raises the stakes. Before you begin to think about what style of options trading is right for you as a day trader, consider the amplified risk.

According to Bloomberg, options day trading took off during the pandemic when people were trapped at home, often out of work, and stuck experimenting with ways to make money. The outcome was predictable — during the bull run that took place after the original COVID-19 crash, day traders lost $1.14 billion trading options.

Final Take

Options trading is riskier and more complicated than standard buy-and-hold stock investing — but that doesn’t mean that everyday retail investors can’t learn how to do it. Learning, however, should come before doing. Conduct as much research as you can and decide on a strategy before you dive into options trading.

Once you think you’re ready, sign up for a brokerage account that lets you test your strategy with a trading simulator in real time before you put actual money on the line.

Information is accurate as of Sept. 13, 2022, and is subject to change.

  • Nasdaq. 2022.
  • “Implied Volatility Surging for Netflix (NFLX) Stock Options.”
  • Merrill.
  • “What are the Benefits & Risks?”
  • Bloomberg.
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  • Investors Business Daily.
  • “Options Center.”
  • Forbes Advisor. 2021.
  • “Options Trading Explained: A Beginner’s Guide.”
  • Yahoo. 2022.
  • “Do Options Traders Know Something About Tesla (TSLA) Stock We Don’t?”
  • U.S. Energy Information Administration.
  • “U.S. Energy Information Administration.”
  • Financhill.
  • “Top 10 Stocks for Trading Options.”