Here's another one: Underlying=DUST Expiration=2016-07-01 Type=Call-Short Strike=15.00 Bid=0.20 Ask=0.35 Profit about 16% based on margin requirements of broker IB. Of course one would need to hedge if necessary, ie. if the spot reaches the strike within the remaining 2 weeks till expiration. But for this, the underlying would need to rise nearly 50% in that short timeframe --> ie. unrealistic, and good for us, the seller.
I hope you realize that the moment you either buy or sell, you'll be 75% down on the trade, because of the bid/ask spread.
How do you mean that, can you eloborate? 20 cents credit are 20 cents, isn't it? Ahh. I think I understand what you mean. No, no, there is no intention to early-close that trade! Ie. keeping it till expiration.
A big enough order can eat away at the Offer on stocks without depth or with massive orders. I had sloppy orders take out orders I had sitting way ahead of the current offer. I had 200 contracts sitting above $2.00, Sloppy order get's thrown in and cleaned off the Offer, the Market was $1.47 x $1.55 50 x 50 with 20 x $1.75 BATS, $2.00 Cb2 with my CBOE routed order I got filled above my offer price because they consolidated a 2000 contract order at $2.50 which drove the stock up $1.00. I never complained they took my order and consolidated it with the giant order instead of allowing everything to get picked off. Bigger traders can clean out the Offer leaving the tail end sitting as the new bid, it happens with Weekly contracts and other smaller thin stocks I trade after taking the offer. Usually you can get filled at the offer most of the time if not better, if your Brokerage has price-enhancement you might get filled at $1.50 in my example of the Bid x Ask $1.47 x $1.55 while the $.10 to $0.40 per contract Brokerages will usually fill you at $1.55 almost all the time because they are saving you the extra 30 cents per contract while costing you $150+ in price savings. I caught that too often, your paying I paid $20 in commission but lost $200 in price improvement. Keep that in mind, there's a Brokerage I traded with that rarely ever enhanced the price of my order. I sold 50 contracts at Brokerage (.30 per contract) getting filled at $1.90 while another Brokerage I had the same 50 contracts got filled at $2.01. You can imagine the shock of getting a trade $550 better in price improvement. I moved my account out of them after seeing how bad orders were getting filled. Stock orders were just as sloppy too, so think about that!
marsman, I should have used a limit order but I wanted to confirm my suspicious nature about that brokerage. They were bad, putting in a limit order they would lock markets by using a old ECN scalping strategy. In the old days a traders and market makers could force a order to remain in the book to avoid paying ECN fees as long as another trader did not have a order in the ECN they planned on using. I see brokerages doing the same thing by keeping orders locked in the Book or Exchange. I went to sell a option with a limit $1.25 x $1.45. Someone on EDGX flashed a order of bid of 2 contracts. I put in the limit order at $1.35 the bid from EDGX disappeared showing my order on ARCA. Slowly 20 contracts gets chewed away in lots of 2s as the underlying goes higher. Cheap Option Brokerages make almost all their money in "order routing fees". How can they make money if Amex is charging them $.30 per contract to route when their charge $.10-$40 per contract? Some Exchanges charge less based on volume, its as you said, I should have used a limit order.