options 101- entry strategy

buybig · Dec 3, 2007

guys,

need help,

It seems like I get hosed when i set a limit order to buy an option.

im familiar w/ greeks etc. i look at the underlying for support @ entry.

watching NOV and OII today 2:30 and couldnt get filled. left a limit order @ what i was willing to pay and bam.. fills w/ a 50$ loss.. (2 contracts, getting my feet wet)

any suggestions?

TIA

commiebat · Dec 3, 2007

I'm not sure I understand. How can you get an opening order filled for a loss?

If you place a limit order, you should be filled at your limit price or better, or not filled at all. If you get a worse fill than your limit price, call your broker and insist they make up the difference.

forex-forex · Dec 3, 2007

Why use a LIMIT order? It will only get filled when the position moves AGAINST you, if it moves in your direction then it doesn't get filled at all. I suggest using a MARKET order to get the transaction completed and then you can move on.

commiebat · Dec 3, 2007

Quote from forex-forex:

Why use a LIMIT order? It will only get filled when the position moves AGAINST you, if it moves in your direction then it doesn't get filled at all. I suggest using a MARKET order to get the transaction completed and then you can move on.

I completely and emphatically disagree.

If you want to get filled at the current market price, place a LIMIT order at the current market price. If you really want to be sure of a fill, place a "generous" limit order by bidding more or asking less than NBBO.

If you place a market order, you are guaranteed a fill, but not a price. Especially in a fast market, you may find yourself paying much more than you expected. And if you're paying so much you wish you had never bought it in the first place, well that's what limit orders are for

trefoil · Dec 3, 2007

forex-forex · Dec 3, 2007

Quote from commiebat:

If you place a market order, you are guaranteed a fill, but not a price. Especially in a fast market, you may find yourself paying much more than you expected. And if you're paying so much you wish you had never bought it in the first place, well that's what limit orders are for

Another good reason to use a MARKET order.

El OchoCinco · Dec 3, 2007

Quote from snugglepuppy666:

guys,

need help,

It seems like I get hosed when i set a limit order to buy an option.

im familiar w/ greeks etc. i look at the underlying for support @ entry.

watching NOV and OII today 2:30 and couldnt get filled. left a limit order @ what i was willing to pay and bam.. fills w/ a 50$ loss.. (2 contracts, getting my feet wet)

any suggestions?

TIA

It is called the bid/ask spread and if you do not understand that, then you are really getting ahead of yourself getting into options. If you think a market order helps those, as some posters have incorrectly stated, they are also mistaken.

The spread is part of the cost of trading be it stocks options or futures.

rmmsmh · Dec 3, 2007

Limit orders are superior to Market orders in most cases. With a limit order on a buy to open above the ask price, I am often filled below the ask price.

With IB you can get a lower commission if you are adding liquidity to the market buy buying between the bid and ask which will only happen with a limit order. Market orders will give the ask price or worse most of the time.

forex-forex · Dec 3, 2007

Quote from rmmsmh:

Limit orders are superior to Market orders in most cases. With a limit order on a buy to open above the ask price, I am often filled below the ask price.

Those fills could be because the stock moved against your position, if the stock moved in your direction then your limit order could go unfilled. With all the work of studying a stock why risk not getting filled with a limit order? Use a market order and get into the position.

neke · Dec 3, 2007

Quote from snugglepuppy666:

guys,

need help,

It seems like I get hosed when i set a limit order to buy an option.

im familiar w/ greeks etc. i look at the underlying for support @ entry.

watching NOV and OII today 2:30 and couldnt get filled. left a limit order @ what i was willing to pay and bam.. fills w/ a 50$ loss.. (2 contracts, getting my feet wet)

any suggestions?

TIA

The bid/ask spread is part of your cost of trading. If your odds cannot cover this cost, don't do it. This is more so if you are day-trading them. It is safer to start with more liquid options (like BIDU, GOOG, AAPL etc) where you can get a decent fill by bidding at slightly better than the "mid-point" of the range (assuming that is the fair price).