New option trader question

If you are trading options that is one thing. The exact fill price is going to be rather significant for you, whether you are a buyer or writer.

However, if you are merely writing an out of the money put with a relative short life, in an attempt to pocket some premium -- at that point in time you place your order, you go with a limit and you go to take out the bid. (2.50)

The ONLY way you would sell at a higher fill price than 2.50 on that contract is if you were willing to wait maybe 15 or 45 minutes and the underlying equity had a run up in price.

Depending on the movement of the underlying equity, the more beta, the more potential movement within that option contract you are trying to write. Timing is everything.
 
Originally posted by tom_p

That should be "drop in price."
More...


Thanks for pointing out my subconscious brain-fart. My mind has been on the opposite track for the last month having written calls so much......I have been trying to leg out of this spread I have....long the stock..short in the money near term calls.....every time I try to cover the calls...its seems that the underlying equity likes to make a little momentum run and thus the premium of the calls moves up too...........

I am pretty anal about posting 100% accurate information. I am glad you caught that little misprint on my part.
 
Actually, there is a way to compete with the MMs on the floor by taking advantage of the auto-ex. system! Meaning, you can sell or buy at a better price than you would normally get.
 
I can usually squeeze another nickel (sometimes a dime) out of the MM with no movement, with medium to light volume on a series usually with the spread at .20-.25. If I come in selling .10 above the bid, they will sometimes fill me right away. Otherwise I let it sit for 10-15 mins, then repost at bid +.05. At least half the time, I get filled right away.
 
ktm,

Even though I have yet to scalp options, but I think your strategy is the same as mine. I know exactly what you're talking about :)

BTW, what trading platform are you using? Is the L2 option quotes easy to read? As for the realtick platform which I am trying now, I have to do an extra click to see the bid/ask size. It's a little weak if the market is moving fast.
 
I use QCharts and IB. Since both have occassional issues, I can usually figure out what's going on between the two of them. QCharts has Level II for the regional options exchanges along with historical T&S and that's nice when it's accurate.

I think the MMs fill us to make us go away. We're like gnats on their asses, trying to cut into their spreads. All those nickels and dimes really add up!!!
 
I use much the same strategy as KTM; But usually I figure it this way. If the MM is willing to sell at 3 that's where I belong also. If there is enough volume on the contract I will place my sell order at the ASK and wait. It will usually fill. CBOE is the best IMO for this .
Previous post is correct that if you need to ask the question you shouldn't be trying it. Also, never use a market order. If you must exit immediately, hit the bid or ask as the situation dictates.
 
Ok, so far there're about 3 people I know scalping options. Including me in the next few months, there'll be 4! Only 4 in this entire forum???

White17, how often do you exit with a profitable trade? Usually, by how much $.10? What platform do you use, and does the L2 helps?
 
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