How much should I think about commission and liquidity costs?

Because they are stupid and should close their BMO whatever account to open an account elsewhere. One contract r/t $22.40?

 

Martinghoul ...... It's a fair question in response to Visaria's post. He thinks that "Your absolute MINIMUM profit target should be 10x cost. Cost equals bid/offer plus commission."

Visaria can't give a reason how he came up with that and when brokers commissions are compared his statement completely breaks down. Martinghoul would you like to try and explain Visaria's post? Can anybody explain Visaria's post?

 

@OptionGuru @Visaria thank you for your feedback - I feel like the point in this case was that trader should make sure that target profits are big enough so that he/she can "disregard" commission costs. Is it 10x or more/less is maybe not so important for this conversation, one can try to figure out which constant is enough for him - in any case, making commission costs relatively small compared to target profit is what matters.

 

Yes ..... Of course you want to recover all costs associated with trading - plus some sort of profit.

 

It is reasonably clear to me (and I am not a "guru") what Visaria meant and I happen to agree with the logic. However, I think I'll leave it to Visaria to explain.

 

It's clear to me also what Visaria posted. And it makes zero sense to base your profit target on your commissions and the bid/ask spread.

 

The fact that it makes zero sense to you makes me sad...

 

@Martinghoul I value your opinion, but please let's try not to pollute this thread with personal feelings and posts that are not in any way related to this topic!

From what people have been saying so far, I am getting a feeling that I should watch out to trade liquid options and make sure that commission cost is relatively small to my profits.

 

Please allow me some light entertainment...

In seriousness, my views are in agreement with your earlier post. The specific number, whether it's 10x, 20x or whatever, doesn't matter, but the principle is correct.

 

Depends on your trading strategy - if you are doing a ton of volume trading penny stocks then definitely worry about it more. Also, don't forget to negotiate.