Large options spread

Vol trade; Vol trade; Distribution trade (which is really a vol trade); Inferior to trading cash products for the reasons stated in the OP (except for the purposes of trading forward vs cash)

 

Software engineer... i tried that for my Co-op. When the firm asked if I was coming back, i said "No. I'm going to try Wall Street instead."

 

You're really not my friend are you @newwurldmn Just can't refuse to go down the rabbit-hole! Topic, on-topic... prove your smarts

Dealing with a computer can be frustrating, I know some just can't hack it. Sorry, that was a cheap shot but had to get it in. ON TOPIC! (needed to remind myself)

 

I am avoiding giving my kids lunch and helping my middle with his math homework.

 

Ok, based on the answers there's no trick that helps with the spread. Midpoint and providing liquidity is not gonna work for obvious reasons. @newwurldmn it's true that it's easier to predict volatility. That is the main reason why i think about options, but the spread kills everything.

 

Can you provide a few of these reasons?

Aren't placing a limit order at the midpoint and providing liquidity basically the same things? Couldn't you deliberately look for options with a small spread and use those to lever your primary edge?

I'm trying to think of the how's not the what's.

What should I trade... IBM.
How should I trade IBM... short it? buy it? buy a call? sell a call? Sell a call and buy a put?

 

Sure:
Many options only appear to have large spreads. In reality, you can hit the middle a surprising number of times, or go past just a few cents. Try it!
Especially, try it with <10 contracts. MM's, I think, like to clear away smaller bids, so they will just take the trade after a few minutes.
Also, put up an OCO order to try and hit a few different contracts.
If you're trading vert/cal spreads, then bid the middle or a hair past. Then, when another trader crosses and hits you're bid/ask, the other one will be able to cross the spread for its b/a, giving you the middle.

And, OP - wtf are you talking about with SPY options? B/A on spy is very tight, especially within 3 months out.

But- are we not allowed to respond to other comments in a thread?

 

I thought it is obvious. When you buy on bid or midpoint it's more likely that your order is going to get filled when the price goes against you.

 

I didn't say anything about SPY i said S&P constituents

 

you can often trade a few cents off of mid in liquid names.

often your edge is much greater than the spread (for example you have 2 dollars of edge with bid offer being 25
Cents)

sometimes the spread is too big to make the trade worthwhile especially in really illiquid names