Hi guys, I'm new to options trading and I'm curious about what these numbers mean. I'm looking at the puts for AVY. I'm looking to sell a put for AVY. For the 190 strike: the open interest = 7, volume= 1, bid size= 120, bid = 0.25, ask = 2.50, ask size = 147. Is the bid size large enough? Do I look at the bid price or ask price when selling? Thanks
The size doesn't matter. The bid/ask tells us that we shouldn't touch this. Would you buy shares of stock for $2.50 when it may be worth only $0.50? Or would you sell it for $0.50 when it may be worth $2.50? Usually you should be able to get the mid price between bid & ask, but on liquid stocks, not stuff with no OI, no volume, and huge bid-ask spreads. But if you want to sell a put on this one for $1.30 and wait till expiration without ever needing to buy it back, then it may work. At least you can always try. Just need to be careful because sometimes the mid price may not be a fair price, while it's difficult to tell what it's really worth. Usually people who buy illiquid options later have difficult time selling it at reasonable price.
oh pls, you're not just new to options, you're new to trading in general. Please do yourself and your account a favour and stick to papertrading for a while until you've learned these very basics. After that, trade ONE options contract and DO NOT sell options short...that part comes later
You are kidding right? How do you expect to compete with the smartest in the market when you can't even inconvenience yourself to read the absolute basics of trading and investing? And why are you even looking at options, start more humble with indexes or equities. You will otherwise get eaten alive and only lose money. That is not an ill wish but a promise.
Avery Dennison (AVY) is a *VERY* thinly traded symbol with little volume or open interest. Many strike prices have zero Vol or OI. The Bid/Ask spreads are wide because of that. If you're new to options you need to pick symbols that are much more liquid with much narrower Bid/Ask spreads. E.g. SPY options usually have a Bid/Ask only a penny (.01) apart. Ditto the QQQ. Right now the July 21 Avery 190 Puts have a Bid of .25 (what someone is willing to pay to buy the option) and Ask of 2.15 (what someone wants to sell the option for.) Right now the 190 Put has a Vol of 0 (zero) and an OI of 7. That means that so far today no one has traded the 190 Puts and only 7 contracts are in play since the contract began trading. The Bid Size is 29 and the Ask size is 30 but consider the Volume which is 0. No bidder want to pay the ask and no one who is selling wants to accept the (low) bid. I advise you to move on to symbols that are much more liquid. Either ETFs or individual symbols. That said, it sounds like you need to educate yourself on options and how they work. Here's a list of my resources that's in my library. Start with a book or two and visit the web sites I have listed. You'll find a lot of valuable information that will help learn about options in general and the Bid/Ask Spread, Volume and Open Interest in particular. As an aside, I trade futures options (/ES exclusively) which is has little higher learning curve that equity options (derivatives of derivatives.) I don't recommend that you start with futures options but have included one recent book (Garner's) in case you want to read more about the subject. Best B Lucci Books Trade Options With an Edge Russell Richards 2017 ISBN 978-1524538187 Option Spread Trading: A Comprehensive Guide to Strategies and Tactics Russell Rhoads 2011 ISBN 978-0470618981 The Complete Guide to Option Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets, 3rd Ed. James Cordier 2014 ISBN 978-0071837620 How to Price and Trade Options + Website: Identify, Analyze, and Execute the Best Trade Probabilities (Bloomberg Financial) Al Sherbin 2015 ISBN 978-1118871140 The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options Dennis Chen, Mark Sebastian 2012 978-0134807522 Getting Started in Options, 8th Ed. Michael C. Thomsett 2009 ISBN 978-0471707127 Trading Weekly Options Russell Rhoads 2014 ISBN 978-1118616123 Essential Option Strategies: Understanding the Market and Avoiding Common Pitfalls J. J. Kinahan 2016 ISBN 978-1119263333 Option Volatility & Pricing: Advanced Trading Strategies and Techniques, 2nd Ed Sheldon Natenberg 2014 ISBN 978-1557384867 Options, Futures, and Other Derivatives, 10th Ed. John C Hull 2011 ISBN 978-9352866595 Options as a Strategic Investment 5th Ed. Lawrence G. McMillan ISBN 978-0735204652 TRADING COMMODITY OPTIONS WITH CREATIVITY: When, why, and how to develop strategies to improve the odds in any market environment and risk-reward profile Carley Garner 2020 978-1948018906 Online Resources TDAmerirade thinkmoney Magazine e.g. 51 issues include 104 bid/ask spread discussions https://tickertape.tdameritrade.com/trading/thinkmoney tastytrade On Demand https://www.tastytrade.com/on-demand e.g. The bid ask spread https://www.tastytrade.com/shows/tasty-extras/episodes/the-bid-ask-spread-07-24-2020 Chicago Board Options Exchane Options Institute Education Products & Services https://www.cboe.com/education/ The Options Clearing Corporation Investor Education https://www.theocc.com/Company-Information/Investor-Education The Options Industry Council Investor Education https://www.theocc.com/Company-Information/Investor-Education Investopedia Options Trading Strategy & Education https://www.investopedia.com/options-trading-strategy-and-education-4689661 The CME Group All About Options https://www.cmegroup.com/education/courses/curriculum-all-about-options.html