I wouldn't hit a bid or take offers in these stocks which is why scanning is important. You would need to find options sitting in the book that the crowd is running away from and take 'm out. You give up a huge amount of edge doing anything else.
I agree that it is easier to predict vol which is why I trade options. Small stocks have much bigger spreads on the bid/ask IVs which is what I was refering to above.
Small stocks seem great from this regard, but there are definitely good reason I don't trade them now. To much work and risk involved for the P&L. As a MM, I would definitely trade these, a ten lot still means something.
In one of recent "Futures" there is interesting statistics published regarding this matter. And conclusion is, that buying calls would be the last thing you want to do. The odds are against you.
I hedge positions, so higher price means larger range of profitability, then higher premium/underlying ratio means higher return (vs. margin requirements, related again to price of underlying).
I agree. Otm calls in general are often the worst way to play moves up. Very true, which is why so many people on the exchanges are leaving or not making money. There are too many single digit or teen stocks out there. Being more comfortable with small premiums, I don't mind it but there are much more opportnities higher. The thought of making a quarter wide market on a 7 dollar stock sounds great, but is unrealistic unless your a mm. There isn't enough volume on these types to sustain the industry. I made some money trading these but not enough to justify paying for a seat lease. It was more like paying for my tab in the bar at the CBOT(forget what it's called).
I just looked at this. It is very interesting, decent volume with most options having wide spreads. Somebody remind me Monday morning. The July 7c traded for .50. Some of this stuff seams like a no brainer.
I`ve just had similar position closed. The stock actually exploded while volatility was on the roof, so I had to roll over position to the next level, but still could make some profit. However, it`s great for non-trending markets, while the markets tend to grow recently, so I keep also bull vertical spreads. This gives better results per margin requirements.