How to read buy/sell signals for options trading

You joined a trading community. You're watching the signals channel. Then an alert drops and it looks like this:

If you're new to options, that might look like a foreign language. Let's break down exactly what each piece means so you can read any options signal with confidence.

Breaking down the signal format

An options trade signal has a standard format. Here's what each part means:

BTO = Buy to Open

This means you're opening a new position by buying a contract. BTO is the entry. When you see BTO, the analyst is telling you they're getting into a trade and you can follow along if you want.

AAPL = The ticker

This is the stock the option is based on. AAPL is Apple, NVDA is Nvidia, SPY is the S&P 500 ETF, etc. You'll see the same tickers you'd see on any stock screener.

250c = Strike price and type

"250" is the strike price. "c" means it's a call option (betting the stock goes up). If it said "250p", that would be a put option (betting the stock goes down).

The strike price is the price the stock needs to reach for the option to have intrinsic value at expiration. But you don't have to hold until expiration. Most traders in alert services sell the option contract itself for a profit well before expiration.

05/16 = Expiration date

This is when the option contract expires. After this date, the option is worthless if it's out of the money. In this example, 05/16 means May 16th. Give yourself at least 2-3 weeks on expirations. Want to catch the full move? Buy more time. As long as your setup is still valid, having time on your side lets you hold the trade and let it work out.

@4.20 = Entry price

This is the price the analyst paid per contract (in dollars). Since each option contract represents 100 shares, buying 1 contract at $4.20 costs $420 total. This is the price you're aiming to get in at or close to.

The exit signal

When it's time to close the trade, you'll see the exit alert:

STC = Sell to Close. You're closing the position by selling the contract you bought. In this case, the contract was bought at $4.20 and sold at $8.40. That's a 100% gain. If you bought 1 contract ($420), you'd sell it for $840 and pocket $420 profit.

Not every trade is a winner though. Here's what a loss looks like:

The NVDA call was bought at $3.50 and sold at $3.15 for a 10% loss. This is normal and happens with every trader and every service. What matters is that the wins outpace the losses over time.

How to evaluate a signal before taking it

Just because an alert drops doesn't mean you have to take every single one. Here's how to think about it:

• Check the price. If the alert says entry @4.20 and the contract is already at $5.50 by the time you see it, you missed the entry. Don't chase.
• Look at the chart. Even if you're following signals, take 30 seconds to look at the stock's chart. Does the setup make sense to you? Is it near support or breaking through resistance?
• Consider your position size. Never put more than 1-5% of your account on a single trade. If the signal is for AAPL calls at $4.20, that's $420 per contract. How many contracts make sense for your account size?
• Check the expiration. Make sure there's enough time for the trade to work. 2-3 weeks minimum. If the expiration is only a few days out, the trade needs to work immediately or time decay will eat your premium. More time means you can hold as long as the setup is still valid.
• Know your risk. Before you enter, know how much you're willing to lose on this trade. Set a mental stop loss or use the one the analyst provides.

Common terms you'll see in signals

Here's a quick reference for the most common abbreviations and terms:

• BTO = Buy to Open (entering a long position)
• STC = Sell to Close (exiting a long position)
• c = Call option (bullish, betting the stock goes up)
• p = Put option (bearish, betting the stock goes down)
• @ = Entry or exit price per contract
• PT = Price target (where the analyst expects the contract to reach)
• SL = Stop loss (where to cut the trade if it goes against you)
• ITM = In the money (the option has intrinsic value)
• OTM = Out of the money (the option needs the stock to move further)

What makes a signal service trustworthy?

Now that you can read signals, you need to know if the source is legit. Look for these things:

• A full trade log. Every BTO should have a matching STC. If they only show entries and never show exits, that's a red flag. At TradingTheTrend, we log every single trade — we've tracked over 8,000 trades across 5+ years.
• Losses included. Nobody wins every trade. If a service only shows winners, they're hiding something.
• Explanation behind the trade. The best services tell you why they took the trade, not just what to buy. This is how you learn.
• A responsive community. Can you ask questions and get answers? A service that just drops signals and disappears isn't teaching you anything.

Start reading signals today

You don't need to be an expert to follow options signals. You just need to understand the format, manage your risk, and use the signals as a learning tool — not a replacement for thinking.

If you want to see real signals in action, join our free Discord and watch how our community trades. When you're ready for full access to signals and education, VIP starts at $65/month.