Why do you guys trade options?

[ramaTrade]

Quote from rew:

That is correct. For option trading I stick to assets that have highly liquid option chains with low bid/ask spreads. Whatever edge you might have in your trading strategy must overcome that bid/ask spread before it has a chance of doing better than break even.

Rule of thumb:

excellent spread = less than 2% of bid price, i.e. 1.00 X 1.02, 8.00 x 8.10

good spread = less than 5% of bid price, i.e. 1.00 X 1.05, 8.00 X 8.50, 21.00 X 22.00

aceptable spread = less than 10% of bid price i.e. 1.00 X 1.1, 20 X 22.


I trade all three. But if spread is more than 20% of bid, you'd better stay away.

 

[Maverickz]

Quote from ramaTrade:

Rule of thumb:

excellent spread = less than 2% of bid price, i.e. 1.00 X 1.02, 8.00 x 8.10

good spread = less than 5% of bid price, i.e. 1.00 X 1.05, 8.00 X 8.50, 21.00 X 22.00

aceptable spread = less than 10% of bid price i.e. 1.00 X 1.1, 20 X 22.


I trade all three. But if spread is more than 20% of bid, you'd better stay away.

I have always considered the spreads but never had a hard and fast rule of thumb like that. I kind of like it. I may add this to my trading plan. Thanks.

 

[Maverickz]

Quote from JohnTrader:

If you would like to short GTLS for tomorrow for the same profit of 2%, would you prefer shorting the stock or buying its PUTs? It looks like the spread in options is huge.

Aren't you glad I talked you out of shorting GTLS? ; )

If you are still interested in trading GTLS I would look for a pull back to the $26.52 - $24.93 range (top 2 red lines on chart below). If it fails to breakthrough this level I would consider a long position of some sort....probably the stock itself since the option spreads and volume are horrible right now.

<img src="http://www.fantasydaytraders.com/eqpics/gtls-2.jpg">