beginner question in options

J

jackbwa

Hello

I have an option question that couldn’t find an answer in the web, I do papertrading in thinkorswim

I bought a call option and I want to sell it now, the question is, does the option will be sold at the mark Price (mark price in thinkorswim is the average of the bid and ask ) or the bid price?

Thanks
 
In TOS paper trading you'll get filled wherever you set the limit between the bid/ask. Be careful of this because it's overly optimistic and can make you think you're a genius trader.
 
In real trading, you never know the final price in advance. It is somewhere between ASK and BID. What I found is the best is to create an order with the best price and then change it dollar by dollar until the order is filled. Like that you'll have the best market price.

It might be the Mid price, but maybe not. Sometimes it's surprisingly better, but sometimes not at all.
 
If you do a Market order, it'll sell instantly at the BID price.

If you set a Limit anywhere between then the ASK should become your price and your order then if someone buyers your Options then yours will be sold.

Obviously if the price drops, the Ask will drop from others trying to sell and you'll have to lower the order, potentially lower than the guaranteed bid ( given enough Contracts at the Bid )
 
Also, the liquidity of the option plays an important role in where you're going to get filled. Always try to stick to options that are traded enough so you can get in and out at a reasonable price. If the bid/ask spread is outrageous, you probably want to stay away from that product because you could lose a huge % of your premium just by entering the trade since there is no liquidity in your product.

The best option markets will have spreads of a cent or two: stick with those and even if you're selling at the bid, its better than having to deal with a massive spread in some product no one trades.
 
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