A couple of newb questions

[HtownTrader]

1. Is there a trick or strategy or something to know to getting the best fill price when buying options? I try to split the difference between the bid and ask, and often it works, but sometimes it doesn't. Does splitting the difference almost always work on the high-volume options? Is it possible to get filled beneath the splitting-the-difference price?

2. Is it best to stay away from the option when the volume is low/nonexistent and the bid/ask spread is wide? I have noticed that bid-ask spreads of even options of stocks in the NASDAQ 100 are sometimes wide, and I'm wondering if it a good idea to not get involved with those unless I see massive potential. I am looking at INCY for example, and one option with an expiration 70 days out has a spread of .20/.80 while another has a bid/ask spread of 0/1.15 and there is virtually 0 volume on any of the options with that expiration.

3. Is trading profitably potentially as simple as waiting for a stock to get to a support or resistance level (after preferably getting there multiple times previously) and then buying/acting based on if it holds or breaks support or resistance? If not, why not?

 

[themickey]

1. Is there a trick or strategy or something to know to getting the best fill price when buying options? I try to split the difference between the bid and ask, and often it works, but sometimes it doesn't. Does splitting the difference almost always work on the high-volume options? Is it possible to get filled beneath the splitting-the-difference price?

2. Is it best to stay away from the option when the volume is low/nonexistent and the bid/ask spread is wide? I have noticed that bid-ask spreads of even options of stocks in the NASDAQ 100 are sometimes wide, and I'm wondering if it a good idea to not get involved with those unless I see massive potential. I am looking at INCY for example, and one option with an expiration 70 days out has a spread of .20/.80 while another has a bid/ask spread of 0/1.15 and there is virtually 0 volume on any of the options with that expiration.

3. Is trading profitably potentially as simple as waiting for a stock to get to a support or resistance level (after preferably getting there multiple times previously) and then buying/acting based on if it holds or breaks support or resistance? If not, why not?

I'll answer #3.
No such thing as simple generally speaking as stocks can be like murcury, morphing into different shapes/behavour.
With stocks, it pays to trade in synch with the broader market, a rising tide lifts all boats so to speak.
Now here is the crux, stocks which are not represented in the major indexes / small caps, are usually more erratic/unpredictable when it comes to following the herd of other stocks, often they will trade with a mind of their own and applying typical TA rules doesn't apply so frequently. It goes back to risk vs reward behaviour of stocks, small caps can run hard and fast at times but catching those runs can be elusive.
The large caps are easier to trade I find, more predictable, generally follow TA rules, but their runs are often not so spectacular.
So, back to your question, yes, often with large cap stocks more so, but at S/R levels stocks sometimes smashing thru, sometimes stalling, experience helps with determining what likely probabilities are via mood of the market.

 

[smallfil]

If you are buying options, putting the middle price of the bid and asked should be sufficient most times. Now, at times the market makers will widen the spread on the bid and asked by bidding extremely low on the bid side. In those cases, do not chase the bid price. The market maker will just continue to lower the bid price. Those days, you will "never" get filled at a decent price. You would have the choice of selling your options dirt cheap with probably, huge losses or cancelling your order. Cancel your order. The very next day, the option premium should be higher as the market maker now try and unloaded at much higher prices! Take note too on the open interest. You want atleast, 250 contracts to make sure there is enough liquidity if you are wrong and need to get out! If you buy an option with just 20 contracts, you will have a hard time getting out at favorable prices as the bid and asked prices will be very wide!

 

[silver182]

1. Is there a trick or strategy or something to know to getting the best fill price when buying options? I try to split the difference between the bid and ask, and often it works, but sometimes it doesn't. Does splitting the difference almost always work on the high-volume options? Is it possible to get filled beneath the splitting-the-difference price? Spliting Bid & Ask works on high volume options. Actually if you have time to watch the Bid Ask Level II for a period of time you will see the right time to pull the trigger.

2. Is it best to stay away from the option when the volume is low/nonexistent and the bid/ask spread is wide? Yes..I have noticed that bid-ask spreads of even options of stocks in the NASDAQ 100 are sometimes wide, and I'm wondering if it a good idea to not get involved with those unless I see massive potential. I am looking at INCY for example, and one option with an expiration 70 days out has a spread of .20/.80 while another has a bid/ask spread of 0/1.15 and there is virtually 0 volume on any of the options with that expiration. Stay away from high spread low volume.

3. Is trading profitably potentially as simple as waiting for a stock to get to a support or resistance level (after preferably getting there multiple times previously) and then buying/acting based on if it holds or breaks support or resistance? If not, why not? High Volume stocks will show, hold, & build trend lines.. lower highs, lower lows, obviously trending down. Higher lows, higher highs, trending up. That said the market is fickle as can be..the trend lines can & will be broken quickly with little to zero warning.
I like to trade options with stocks that "I follow only"...the tricky parts then will be expiration dates, & strike price. Watch one or two stocks and you'll build a feel..your learned knowledge /experience is.... in my opinion better than all of the talking heads ideas combined.

 

[themickey]

Silver makes a good point at #3, of being very selective and concentrating on just a few stocks.
Applying trading to just any random selection I believe is a high reason for failure.
If you select stocks which on lots of study meet your criterior, your success rate will increase.

 

[ironchef]

1. Is there a trick or strategy or something to know to getting the best fill price when buying options? I try to split the difference between the bid and ask, and often it works, but sometimes it doesn't. Does splitting the difference almost always work on the high-volume options? Is it possible to get filled beneath the splitting-the-difference price?

2. Is it best to stay away from the option when the volume is low/nonexistent and the bid/ask spread is wide? I have noticed that bid-ask spreads of even options of stocks in the NASDAQ 100 are sometimes wide, and I'm wondering if it a good idea to not get involved with those unless I see massive potential. I am looking at INCY for example, and one option with an expiration 70 days out has a spread of .20/.80 while another has a bid/ask spread of 0/1.15 and there is virtually 0 volume on any of the options with that expiration.

3. Is trading profitably potentially as simple as waiting for a stock to get to a support or resistance level (after preferably getting there multiple times previously) and then buying/acting based on if it holds or breaks support or resistance? If not, why not?

Let me answer your three questions from the perspective of a retail amateur:

1. In general I found the market makers seemed to know the short term movement of the underlying, so I could get mid point fill when the next move was down but not when the next move was up. I think they delta hedged their trades so mid to me was not mid to them.

2. I do make money on thinly traded options, most with wide bid/ask spreads. The key: When my bet on the direction is correct.

3. Handle123 told me at one time: "Dance" options around the underlying you hold. Why? Unless you trade non directional like the pros, it is critical to know the underlying well.