How to buy a long term option

Discussion in 'Options' started by ProgrammerGuy, May 23, 2008.

  1. Hi,

    I want to buy a Oil PUT that expire in say 09 or 10. However I notice that they barely trade at all. What is the best way to obtain a position without paying a TON in slippage?

    Is there perhaps a morning or an EOD cross in options?

  2. Just something to look at:
    The USO oil ETF has Jan 09 options .40 wide and they are a number of strikes trading today.
  3. olias


    I'm not an expert, but here's my thought. Look at the time value that the active months show. YOu can look at an option that expires is 60 days and and guage what the time value is per day. Whatever you gauge the daily time value to be, multiply it by the number of days on the option you're insterested in. It should give you an estimate of how much time value you would expect to pay. See how that figure compares to the bid/ask spread you're getting from your broker. When you're ready to trade make sure you use a limit order and, I would say, try to shoot low and get a favorable price. Better off to start your bid too low I would think.
  4. yes trade the uso options, the underlying mirrors the light crude oil movement almost exactly, and the spread is bearable

    Just becareful though if your trading plan has such a long time horizon, although oil is has been speculated to an unsustainable level, the thing to keep in mind about bubbles are they tend to go for quite a while before busting, even though everyone knows it's a bubble, it will still expand.

    Right now, the retail guys are just starting to jump onto the long side for oil. So unless government start forcefully trying to drop the oil price, it may still have a way to go. So manage your positions, dont go in all at once since you plan to hold it for a while.