Buying a covered call, bid/ask

[SanMiguel]

When you buy a covered call as a strategy you put a limit order in for the difference in some platforms.
Eg
Buy 200 stockA at 50
Sell 2 March 20 45 call for 1.9

Limit shows up as something like
48.1 bid or 48.2 ask

Obviously I want to sell the call for as much as possible so where do you put the buy limit in since one is buying stock, one is selling options.
Ideally I want to buy stock at bid 50 and sell the call at 1.9 ask

 

[OptionsOptionsOptions]

....... I want to buy stock at bid 50 and sell the call at 1.9 ask

The option order will go unfilled - be more realistic and place your order closer to the bid.

 

[SanMiguel]

The option order will go unfilled - be more realistic and place your order closer to the bid.

Then you are buying stock at bid and selling option at bid?

 

[OptionsOptionsOptions]

Then you are buying stock at bid and selling option at bid?

I don't have a clue on the stock - but the option will have to be sold at the bid, or better price if you can get it.

 

[SanMiguel]

I don't have a clue on the stock - but the option will have to be sold at the bid, or better price if you can get it.

Why does it have to be? If you were selling it naked you could sell it at the ask?

 

[OptionsOptionsOptions]

Why does it have to be? If you were selling it naked you could sell it at the ask?

You could try and sell at the ask - but it will go unfilled.

 

[SanMiguel]

You could try and sell at the ask - but it will go unfilled.

If someone submits a market order to buy, which will be at the ask, that would fill my order, no?

 

[OptionsOptionsOptions]

If someone submits a market order to buy, which will be at the ask, that would fill my order, no?

No ..... you will be selling at the bid. There is always a bid/ask spread, on all transactions.

 

[Metamega]

If someone submits a market order, it’ll most likely be routed to someone paying for that order or a dark pool before it goes to you.

Market maker has his bid/ask at 2.00/3.00.

You join that ask at 3.00. Some retail sends their market order(less likely in options), they route it to their buddy and say hey do you want this order? He says sure and sells at 2.95 giving them a price improvement so they can beat the NBBO. This market maker is also in queue at 2.00/3.00 along with you and the other market maker except he’s cut his spread. He sold for 2.95 but can buy back at 3.00 leaning on yours and the other market makers orders at 3.00. Cutting his exposure. This happens all day. While you get infilled until your limit is sitting and mid most likely.

Your counter party, most likely a market maker isn’t going to take your trade until its in their interest.

 

[qwerty11]

You can also do a synthetic put (combo order). Then you have only 1 order to look after...