Have traded stocks and/with options for a few years now, with, imo, decent profits, and maybe I'm ready for the next level. So I got a question, I can't seem to find an answer for the amount of options one can trade on any given stock ? Say I want to sell, or buy 20.000 put options ? Is the marketmaker obliged to fill that kind of order for me ? Or what if, say, 10.000 traders want to do the same with just 2 options ? The amount will be the same ? Would appriciate any answers. Regards, Profitman
The only limit is the cash in your account... - You can buy as many options as your cash balance will allow. - You can sell as many options as your margin requirements will allow.
So even if OI is about say 200 contracts, I can sell or buy another 5000 contracts ? Ofcourse if my account is big enough. So what I stated, MM is obliged to fill my order ?
As long as the market maker and/or the public are willing to take the other side, I'm not aware of any caps that limit the creation of new contracts. The risk, of course, is if you're in a thinly traded name or a thinly traded strike - you might get a small fraction of your desired quantity in the range of the current bid-ask.
http://www.optionsclearing.com/webapps/position-limits There are also hedge exemptions that can be applied for to extend the position limit
Thx for your answers, very helpfull, and ajacobson, thx for the link. It's all about large cap stocks like T, WMT, PG, those kind of stocks. I understand that it's, in normal cases, impossible to open up 10.000 postitions in a thinly traded stock, or indeed with a price that is totally skewed with reality. Just wondered, if I buy 1000 pieces of say, WMT, and I want to buy 10 married puts with it, that won't be a problem. But when 1000 people at the same time, for some reason, will do the same, 1000 x 10 will be 10.000 put contracts, and then I started to wonder...... OI isn't that high, even in stocks like WMT. How do the big guys protect their positions ? Can imagine that a guy like Warren Buffett has some kind of protection in his positions ?
I have a related question. If I place an order for any number of options on some random stock OTM and a few months out.. who takes the other side?? Is it a real human person market maker that manually takes the trade.. Or is it an algo that creates a delta neutral position against me?