I am starting out in options (still have to finish Mc Millan books, never placed an option trade). I have questions regarding order execution: if you bid on the inside+5cents with small size (10 contracts or less) is your order displayed and what are the odds of getting a fill? Same when offering. Basically can you succesfully and consistently bid/offer inside the spread? I was thinking about buying QQQ Oct 29 calls this afternoon when I came up with this question, after a look at the charts I think there is still some downside since NDX broke the 98 2bottom closing lows so I did nothing.
Trading options
- Thread starter Kicking
- Start date
You can always try to split the spread, although #1 there will be no guarantee that you will be filled, especially since options are considerably less liquid. #2 is that there are new rules imposed on option trading that restrict you from splitting the spread more than once within a certain period of time (I forgot the exact specifics, perhaps someone else can elaborate). As someone who trades options frequently, I sometimes split the spread if it's wide and try to get a fill, but most times I will simply go after the bid or ask, as most of my option trades are swing trades.
cclee,
My swing trade strategies depend on whether the current market environment is a trending market or a rangebound market. If the market is trending (for example the overall markets have been in a downtrend for the past several months), I will use basic chart reading TA to determine the course of action. In this continued downtrending market, for instance, I bought October 1400 NDX puts as the index broke down from its descending channel around Sept. 5.
In a rangebound market, rather than buy options I prefer to sell them as naked positions, taking advantage of time value erosion and the market's tendency to remain in a fixed range. For instance, if let's say an index is trading within a 200 point range, you could do a naked strangle by selling calls with a strike at the top end of the range and puts with a strike at the bottom of the range. That way, as long as the index remains in that 200 point range, at expiration you get to keep the entire amount of the premiums from selling the options. If the index breaks out to one side or the other, you can simply buy back that side of the options and let the other side ride.
While I've mentioned indexes here, the same strategies apply to stocks and sector indexes.
My swing trade strategies depend on whether the current market environment is a trending market or a rangebound market. If the market is trending (for example the overall markets have been in a downtrend for the past several months), I will use basic chart reading TA to determine the course of action. In this continued downtrending market, for instance, I bought October 1400 NDX puts as the index broke down from its descending channel around Sept. 5.
In a rangebound market, rather than buy options I prefer to sell them as naked positions, taking advantage of time value erosion and the market's tendency to remain in a fixed range. For instance, if let's say an index is trading within a 200 point range, you could do a naked strangle by selling calls with a strike at the top end of the range and puts with a strike at the bottom of the range. That way, as long as the index remains in that 200 point range, at expiration you get to keep the entire amount of the premiums from selling the options. If the index breaks out to one side or the other, you can simply buy back that side of the options and let the other side ride.
While I've mentioned indexes here, the same strategies apply to stocks and sector indexes.
Some other practical questions here: what are the trading hours on options exchanges other than CBOE (8:30AM-3:00PM CT)? Is there anything like ECN's in afterhours or are you just f*cked if the underlying stock goes against you big in afterhours? And while I am at it, how is IB Best for options? Thank you very much for your time.
There's currently no extended hours trading on options, so if a stock moves big in after hours you can't really do anything about your option position.
IB's best is excellent on options, as it automatically routes your order to the exchange with the best inside price at that moment. Most of the time my fills are within a few seconds, almost as fast as most of my stock fills (when I'm going after a bid or ask that is).
IB's best is excellent on options, as it automatically routes your order to the exchange with the best inside price at that moment. Most of the time my fills are within a few seconds, almost as fast as most of my stock fills (when I'm going after a bid or ask that is).
def
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kicking,
beware that different exchanges and different products will provide different execution results. i.e. if your order goes to a market where autoex is turned off (IB tries to route only to markets where electronic routing is on) your order could get hung up with a specialist. Others will have to tell you specifics about markets like QQQ which trade on the AMEX.
beware that different exchanges and different products will provide different execution results. i.e. if your order goes to a market where autoex is turned off (IB tries to route only to markets where electronic routing is on) your order could get hung up with a specialist. Others will have to tell you specifics about markets like QQQ which trade on the AMEX.
OK thank you. It seems like I keep coming with questions all the time. I am doing some work to prepare tomorrow and I am looking at AMAT and Nov01 32.5 Call(from PC QUOTE):
3.00+0.80 2.45 2.65 231 1299 32.5
3.00 1.03 0.40 0.098 -0.019 83.69% 32.5
AMAT finished the day way off its high at 32.5 to close at 31 gaining $.65 for the day however the call gained 80 cents closing at 3. Why is that? Unless the quote is incorrect, the delta is only 0.40 and AMAT gained .65 while the call gained .80?
Same with QQQ nov01 29 call, up 80 cents (delta of .95),QQQ being up only 30 cents. I don't get it, with a delta of one for instance, isn't the option supposed to go up 1 point for each point gain in the underlying? Here the options went up more than the underlying and the implied volatility is likely down if I look at i.volatility for the Q's( data is a day old though btw) and also VXN.
3.00+0.80 2.45 2.65 231 1299 32.5
3.00 1.03 0.40 0.098 -0.019 83.69% 32.5
AMAT finished the day way off its high at 32.5 to close at 31 gaining $.65 for the day however the call gained 80 cents closing at 3. Why is that? Unless the quote is incorrect, the delta is only 0.40 and AMAT gained .65 while the call gained .80?
Same with QQQ nov01 29 call, up 80 cents (delta of .95),QQQ being up only 30 cents. I don't get it, with a delta of one for instance, isn't the option supposed to go up 1 point for each point gain in the underlying? Here the options went up more than the underlying and the implied volatility is likely down if I look at i.volatility for the Q's( data is a day old though btw) and also VXN.
def
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Originally posted by Kicking
OK thank you. It seems like I keep coming with questions all the time. I am doing some work to prepare tomorrow and I am looking at AMAT and Nov01 32.5 Call(from PC QUOTE):
3.00+0.80 2.45 2.65 231 1299 32.5
3.00 1.03 0.40 0.098 -0.019 83.69% 32.5
AMAT finished the day way off its high at 32.5 to close at 31 gaining $.65 for the day however the call gained 80 cents closing at 3. Why is that? Unless the quote is incorrect, the delta is only 0.40 and AMAT gained .65 while the call gained .80?
for amat $3 was the last trade. if I am reading your line correctly the closing bid/ask = 2.45 at 2.65. (i'd say it would more likely to trade around 2.50 given your figures).
I checked bloomberg and the official closing price is 2.65