An options watch list is simply a list of underlyings that we can keep track of in a trading platform. Building and maintaining a watc hlist is an important aspect of everyday trading. From our watch list we can see trends, spot price extremes, and get a general scope of the market conditions.
At tastytrade, we like to put futures first and foremost even if it is not a trading vehicle that we use. Futures are generally the most liquid underlyings that are available and they trade outside of standard market hours. This allows us to know where the market is at any point in time throughout the day. We consider /ES to be the best market indicator because it is the most actively quoted product in the industry. /VX is what we look at to gauge where volatility is from a general market sense.
We then add a core list of stocks which can change based on industries that we are interested in. It is important that we update this list frequently to keep us engaged in the market. We believe that adding some of the biggest names and most expensive stocks to our watch list is important because there is a degree of correlation between those underlyings and the markets. We believe that monitoring liquidity is also an important aspect of watch list management.
Last but not least, we like to configure our watch list to show the bid/ask spread. This allows us to view the current market prices, but this also shows us where different underlyings are priced outside of market hours.
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