The short answer
A stop on an option in thinkorswim is a sell order that waits under the price. When its activation price is reached, it turns into a market order and sells at whatever the next buyer pays, which may be well under your number. What counts as "reached" is your choice, and most people never look at it: STD waits for a trade at your price, Mark waits for the midpoint between bid and ask, Bid waits for the bid. And there is no trailing stop for an option. thinkorswim accepts those only on stocks.
That is the whole page in one paragraph. The rest is the same thing with numbers, because a stop is one of those ideas that sounds obvious until you open its settings.
How does a stop order work on an option in thinkorswim?
Think of it as a tripwire with a market order tied to it. You set the wire at a price. Nothing happens while the option stays above it. When the price touches the wire, thinkorswim sends a market order, and a market order takes the next price on offer.
thinkorswim's manual is blunt about the part people miss: there is no guarantee the fill will be "equal to or near the activation price."
An example, made up but ordinary:
| Step | What happens |
|---|---|
| You buy | 2 SPY calls at 3.00 |
| You set | a sell stop at 2.00 |
| The option drops | the bid goes 2.10, 2.05, 2.00 |
| The wire trips | thinkorswim sends a market sell |
| The next buyer pays | 1.85 |
| What you lose | (3.00 − 1.85) × 100 × 2 = $230, not the $200 you planned |
The stop did its job. It got you out. It just did not promise the price, and on an option the gap between "my stop" and "my fill" can be wide. If you want the full list of ways a stop can disappoint, why a stop loss does not trigger, in seven reasons is the long version.
What triggers a thinkorswim stop: STD, Mark or Bid?
This is the setting that decides when the wire trips. The manual lists three activation prices for a stop and for a stop limit:
| Setting | What it watches | In plain words |
|---|---|---|
| STD | Trades | Fires when a trade happens at your price |
| Mark | The mark | Fires when the midpoint between bid and ask reaches your price |
| Bid | The bid | Fires when the best bid reaches your price |
The glossary defines the mark as "the midpoint between the bid and the ask." So it is not a trade. It is the halfway point of the quote.
Here is why the choice matters on an option. Same stop, same moment, three answers:
| The quote right now | Bid 2.00, ask 2.30, last trade 2.25 an hour ago |
|---|---|
| Mark | (2.00 + 2.30) / 2 = 2.15 |
| STD stop at 2.00 | waits. No trade at 2.00 has happened |
| Mark stop at 2.00 | waits. The mark is 2.15 |
| Bid stop at 2.00 | fires. The bid is at 2.00 |
Read it this way. A Bid stop is the jumpy one: one buyer stepping back can set it off. A Mark stop is the middle: it moves when the quote moves, not when one side twitches. An STD stop needs somebody to actually trade. If nobody trades that contract, an STD stop has nothing to read, and it sits there while the quote slides away under it.
None of the three is "correct." The point is to pick one on purpose, the same way you pick the price.
Stop or stop limit on an option?
A stop becomes a market order. A stop limit becomes a limit order: once it is activated, it sells at your limit or better, and not below.
That sounds safer. It is safer in one way and worse in another. thinkorswim's own warning: with a stop limit, "you risk missing the market altogether."
| You set | The option then | Stop at 2.00 | Stop 2.00, limit 1.90 |
|---|---|---|---|
| drifts down to 1.98 | sells around 1.98 | sells at 1.90 or better, so around 1.98 | |
| drops straight to 1.60 | sells around 1.60 | does not sell. You still hold it at 1.60 |
So the stop limit protects you from a bad fill and leaves you open to no fill. On a contract that can halve in a few minutes, "no fill" is the expensive one. If you use a stop limit, set the limit with room under the stop, and know that it is a price you are willing to not get.
Can you put a trailing stop on an option in thinkorswim?
No, and this one catches a lot of people. The manual says, on two separate pages, that trailing stops and trailing stop limits are "accepted only for stocks that trade on NASDAQ, NYSE, and AMEX." An option is not on that list.
For a stock, a trailing stop does what the name says. Buy at $40, trail by $3, and the stop starts at $37. The stock climbs to $50, the stop follows to $47. The stock falls back, the stop stays at $47. It only moves one way.
For an option, you have three honest choices:
- Move the stop yourself as the trade works. Up only. Never down.
- Use a fixed stop and a fixed target, and leave both alone.
- Watch the stock instead of the option, which is the next section.
Can the stop follow the stock instead of the option?
Sort of. thinkorswim's Order Rules window lets an order carry conditions, including one on an underlying symbol's price, and the manual notes that symbol "may be different than the order symbol." A condition can decide when an order is first sent and when it is canceled.
So you can build an order that says: when SPY trades below 578, send a market sell for my 2 SPY calls.
| A stop on the option | An order with a condition on the stock | |
|---|---|---|
| What it watches | the option's price (STD, Mark or Bid) | the stock's price |
| When it sells | when the option reaches your stop | when the condition is true |
| The catch | a wide option quote can set it off, or slide past it | the option's price at that moment is whatever it is |
One honest gap. The manual says the condition decides when the order is submitted. It does not say where the condition is watched or how fast, so this guide does not either. Before you rely on one, place it on a paper account and watch it fire.
How do you attach a stop and a target to an option trade?
With a 1st Triggers OCO. The first order is your entry. When it fills, it triggers an OCO pair: a profit target and a stop. OCO means "one cancels other": when one of the two fills, the other is canceled.
In Active Trader it is the TRG w/bracket choice in the Big Buttons panel. You set an offset, the distance from your entry, as a dollar amount, ticks or a percentage.
| Entry | Offset | Target | Stop |
|---|---|---|---|
| Buy 2 calls at 3.00 | 1.00 | sell at 4.00 | sell stop at 2.00 |
| If the target fills at 4.00 | done | canceled | |
| If the stop fires at 2.00 | canceled | sells at the next price |
One thing the ladder makes very easy: moving the stop. Each working order is a bubble on the price ladder, and dragging a bubble changes its price. That is handy for a target. For a stop, it is the same drag that widens a stop you set while you were calm. Why that happens, and how people stop doing it, is written for Interactive Brokers, but the habit is the same on any platform. The Interactive Brokers version of this whole setup is bracket orders in TWS.
Why was my thinkorswim stop rejected?
Schwab's list of rejection messages has two that fit a stop on an option.
"REJECTED: Invalid Price." The list says options under $3.00 go in 5-cent steps and options over $3.00 in 10-cent steps. So on a 2.40 option, a stop at 1.93 is not a price. 1.95 or 1.90 is.
"REJECTED: Limit price is too aggressive." The list explains it as a limit on the wrong side of the market that would fill at once, and adds a hint worth reading twice: if you were trying to place a stop for protection, check the order type. A sell limit at 2.00 on an option bid at 2.40 means "sell now, at 2.00 or better," which is the opposite of what you wanted. A sell stop at 2.00 means "sell if it falls to 2.00."
One more rule from the order entry page. A stop accepts DAY or GTC as its time in force. The manual says other choices are shown but will result in an error.
| What you see | What it usually means | The fix |
|---|---|---|
| Invalid Price | the price is not a valid step | round to 5 cents under $3.00, 10 cents over |
| Limit price is too aggressive | a limit where you meant a stop | change the order type to STOP |
| An error, with a time in force other than DAY or GTC | the stop takes only those two | pick DAY or GTC |
Where Degen Pro fits
It does not fit here. Degen Pro is a Mac app for Interactive Brokers; the stop, the keys and the lock need Interactive Brokers, and it does not connect to thinkorswim. What works on any broker is the habit under it: decide before the open how much you can lose today, and stop when you get there. The loss budget and position size calculator is free and does that arithmetic in your browser for any account.
Before you send the stop
- Is it a STOP, not a LIMIT. A sell limit under the market sells now.
- Which activation price: STD, Mark or Bid. Pick it on purpose.
- Is the price a valid step: 5 cents under $3.00, 10 cents over.
- Stop or stop limit. If limit, how far under the stop, and can you live with no fill.
- No trailing stop on an option. Plan to move it yourself, up only, or not at all.
- Is the time in force DAY or GTC.
None of this is investment advice. Trading involves risk of loss, and a stop that fills is not thereby a good trade.