If you'd like to enter an option trade based on the underlying stock's price movement in thinkorswim, you can do so by specifying a Condition as part of your order. Then, once you're in the option trade, TOS allows you to specify percentage offsets from the entry for the target and stop. This video shows you how to set this up, as well as how to configure a template to make entries quicker. It also shows how you can use the ActiveTrader tool in Thinkorswim to get into a position by specifying the entry price on the DOM, with percentage target and stops. This would be helpful if you're able to watch the trade at the open and adjust the option entry price to get into the trade. ( Click on the X icon in the bottom right of the video to view full-screen. Once in full screen, hit the ESC key to go back to its unexpanded size.)
As with any new technique or system, it's imperative that you PRACTICE in PAPER before trying it in real trading, to prove that you can execute it, that it works for you, and to verify that you understand the mechanics and nuances. You can forward test in paper in real time. Or you can use thinkorswim's OnDemand function to replay past trading activity to test multiple setups in a fraction of the time, and even replay scenarios and practice entries and exits.
A note on using Market vs Limit Orders
If you're setting up your trades outside of regular market hours, or even waiting for a condition to be met, you can choose a Limit or Market order. A Limit order assures that you pay no more than the price you specified, but doesn't assure you'll get into the trade. If your limit is too low once the threshold is met, then your order will be placed, but won't be filled if the price is beyond your limit. So you risk not getting filled when using limit orders. With Market orders, there's a very high chance that your order will be filled, but it may be at a very high cost. And sometimes, with the bid-ask spread being very high at the open, a market order can get filled far above what might be considered a reasonable price for something, due to that spread. But it will likely get you into the trade. If you can watch the trade live, then you can better control the price you'll pay at the open, and can adjust it up if needed without letting the market fill you at the highest possible price. If you can't monitor it, then try to give the trade more room as you anticipate what the cost might be once your threshold is met. You may miss some trades by keeping it too low, but you'd avoid getting a bad fill. Keep practicing, and use thinkorswim's OnDemand to view what has happened to options in the past at the open to better gauge how the market moves and reacts.
In TradeStation, we haven't yet discovered a simple way to set a target or stop based on percentages (though it is provided for trailing stops, which we're not using here as we use both targets and stops - though you could use a trailing stop as an alternate method, but test / verify it works if it's not what's suggested in the system).
Since TradeStation doesn't offer %-based targets and stops, we can use a spreadsheet or calculator to determine what the 30% and -20% offsets would be from the entry price. Then we place an order with the entry conditional on the underlying price reaching its goal, and then specify an OCO with the target and stop based on those offsets.
If you're able to actively manage the orders at the open, you could break this into two parts instead. First, place a limit order with an Activation Rule for whatever condition you need, such as price exceeded a certain threshold. Once in a position, you can place an OCO (e.g. via the Matrix (DOM)) with the offset target and stop exits.
The following video assumes that you want to get the order set up with both entries and exits before the market opens, and offers one of many potential ways to achieve it.
Important: If setting up orders outside of regular market hours, you may need to use GTC rather than Day orders - but remember to cancel them if you do when they don't fill to avoid inadvertent activation after the first day! You could use GTD and specify an end date if preferred.
PRACTICE this on paper many times before trading it for real, to verify that it works and that you can make it work, as you would any new system or technique.
Want just a quick refresher? Go to 12:44 in the video and see a summary of all the steps.
If you're able to watch the computer...
If you're able to be in front of the computer when the market's open, you can simplify the whole process even more. That's because you can be the "filter" that decides when to get into the trade (that is, waiting until the stock meets whatever requirement to enter the trade, such as a bull flag triggers on the daily). And, you can also use a limit order to place the trade to get a good price. For exiting, you can use an OCO (Order Cancels Order) trade that links a target and stop together so that if one side of that OCO triggers, the other side automatically cancels. You can easily calculate the percentage offsets once you know the price you got in. For example, if we got into the option at $5, we can use a calculator or even a spreadsheet to tell us that 30% up would be $6.50, and 20% down would be $4.00. So we can create an OCO with a target of $6.50 and a Stop of $4.00.
There are MANY ways to do this, and it can be done on virtually any platform. To start, you're just placing a simple option entry order once the order triggers. Once in the trade, we can easily determine the percentage offset prices and use an OCO to set the target and stop on the option. You could even just put in a separate stop and target order without the complexity of the OCO, as long as you remember to cancel the part of the trade that doesn't trigger once the other side fills.
The following video shows a way that this could be done in thinkorswim. It uses 3 different screen areas - a chart of the stock, a chart of the option, and the DOM (ActiveTrader, or Matrix, etc.) You could simplify it further by just using the stock chart and the DOM. You can recreate a similar window for each trade you want to execute. That is, if you have 2 trades, you could create the setup on two different monitors to watch and manage both trades at once. Watch how this can be done relatively simply and with practice, you can do these very quickly. Practice setting up trades in paper trading. To get better at it, you don't have to limit yourself to trades at the open. You can do this all day long in paper to practice it so you're ready to do it in real trading. Just choose a stock, entry price, and target and set it up in paper. Repeat it until it becomes familiar and you have the confidence to do it. Then paper trade a "real" setup or two, or more, until you're ready. If you use a platform other than thinkorswim, see if you can set up your charts in a similar way - the concepts should be things you can do in most trading platforms.
Handling conditions where we gap at the open
If you set up your automated order and then find that we gap at the open, you may need to cancel the order. Fortunately, TOS provides a way to cancel an order based on an underlyling contingency using the Cancel section of the order contingency dialog. If the underlying price baps at the open beyond your intended target, for example, one could stipulate that the order is canceled. This may not be able to cancel the order fast enough to prevent getting into it, but it's something that may work when a limit entry order is in place and hasn't yet been met. Like any new approach, it's good to test it in paper before relying on it in real trading.
Here's where an entry order could have an added contingency to cancel the entry order should the underlying stock gap too far at open (example shown outlined in red):
How to Keep an entry order active over multiple days
If the entry order is to be active over more than one day, you'll need to reenter the order each day if you use a Day order. You can use a GTC order for the entry portion, though you'll want to make sure you cancel the order if there's a limit to how many days that order is valid. Some platforms, like Thinkorswim, allow you to specify a "cancel at" date and time to specify when an order should be canceled. You can see the Cancel at entry box just above the red outline in the order details image, above.