bid ask in low traded options.

Discussion in 'Options' started by darwin666, Jun 4, 2009.

  1. I have seen this too many times..

    I was trying to sell INT- world fuel services.. it is 47$.. i was trying to sell the june 50 call

    bid .60 ask .85


    now I use IB.. and most know that in Interactive Brokers , if you change your order you are charged a fee

    since I want to beat the ask. i thought of putting 80 cents. but my experience told me that as soon as I put 80 cents.. the damn auto programs will match my ask. and I will be lost in the crowd.( infact I can see my lone order pushed back in the level II screen)

    hence I put 75 cents.. and guess what? i was the sole ask at 75 and the 85 cent asks got auto lowered to 80 cents...

    the reason I am posting this is , since my goal is to minimize commissions. was this the best strategy. .when u see a big spread in the bid /ask, ( and other factors looks good for the trade)put 2 increments away from the ask , or else the auto trade programs will drown you.
     

  2. If you want to trade, the 75 cent offer is useless - unless the option has reasonable volume.

    Your strategy is great for minimizing commissions.

    But, if you want to actually trade, you should offer at 70 cents. When nearer the bid than the ask, the MMs may be willing to trade with you.

    Mark
    http://blog.mdwoptions.com/
     
  3. Since you are a retail customer your offer will always be first in line ahead of the market makers ( computer offers ). Even if they move their offer down all retail customers get priority. In thinly traded options if you dont want to hit the bid then you should not really expect a fill between the markets.