are the option markets really that illiquid???

S

Sky123987

I was thinking doing nome long term trading.. I'm going to need some leverage and was hoping to do it with options.


Right now I'm looking at XOM which is currently trading @ 88.03 * 88.04.

The MAR 20 65 call options are traing @ 20.00 * 22.30. That sure is a TON of slippage, how does anyone expect to use options succesfully when you have to account for so much slippage?

or are there other options I should be looking at?
 
You're better off just trading the stock for long term trades. The options just aren't traded very often the further out you go in time. Hence, the spreads stay wide. If you're looking for long dated leverage, maybe check out Single Stock Futures.
 
Quote from Sky123987:

I was thinking doing nome long term trading.. I'm going to need some leverage and was hoping to do it with options.


Right now I'm looking at XOM which is currently trading @ 88.03 * 88.04.

The MAR 20 65 call options are traing @ 20.00 * 22.30. That sure is a TON of slippage, how does anyone expect to use options succesfully when you have to account for so much slippage?

or are there other options I should be looking at?
More...
For March 65 Calls, open interest is only 382 contracts, and today there was zero volume; so there's not much liquidity there.
http://finance.yahoo.com/q/op?s=XOM

March 90 Calls have an open interest of 16,288 contracts and a volume of 1373 (and the day isn't over yet).

So why not buy at-the-money Calls for better liquidity?

You said you want to invest long term, why don't you purchase options with more time left until expiration?
Otherwise time decay would eat you alive.
 
Quote from Sky123987:

Right now I'm looking at XOM which is currently trading @ 88.03 * 88.04.

The MAR 20 65 call options are traing @ 20.00 * 22.30.
More...

Your quote showed the options trading below intrinsic? That's some seriously faulty data. Are you using Yahoo for your option quotes or something?

Also, the reason there's no liquidity there is because the Mar 65 is a dumb contract to trade on an $88 stock. Even with tight slippage there'd be no advantage to that trade.
 
Quote from Sky123987:

So I guess you have to choose the ones right @ the money.
More...

You can go one strike in either direction, maybe two, if that fits with your outlook for the stock. A 60 strike on an almost-$90 stock is just a mite excessive is all.
 
Just for example on those March 65 calls in a live market right here at 10:35 east coast time.

they're 21.20/21.40 over 2000 on each side. Is that enough liquidity for you?

Stocks at 86.20

I dont think there is a liquidity concern in those.
 
Quote from Sky123987:

I was thinking doing nome long term trading.. I'm going to need some leverage and was hoping to do it with options.


Right now I'm looking at XOM which is currently trading @ 88.03 * 88.04.

The MAR 20 65 call options are traing @ 20.00 * 22.30. That sure is a TON of slippage, how does anyone expect to use options succesfully when you have to account for so much slippage?

or are there other options I should be looking at?
More...
there is the most amazing option liquidity on these stocks:
QQQQ
SPY
IWM
MSFT
 
Quote from increasenow:

there is the most amazing option liquidity on these stocks:
QQQQ
SPY
IWM
MSFT
More...

Of those 4 only MSFT is a stock and there is more liquidity then you could need in hundreds of optionable stocks, etf's indexes which are listed on 5 or 6 of the options exchangs.
 
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