limit to max spread?

I've been looking at LSTR options the past couple of days, and I'm surprised the bid/ask spread is so large. Only one exchange handles them, but still - the spread is along the lines of 3.20/3.90. Are there any rules about how large a spread can be, or can the specialist do whatever he wants?

 

That is a huge spread! I don't think there is any regulation about spreads, because it is simply the difference between what the maximum price someone wants to buy it for and the minimum price someone will sell it for.

You can download options software to compute the Black Scholes value of the option based on past volatility. You could also put your own bid or ask in -- you don't have to buy the ask or sell the bid.

Of course, you may not get filled -- but that is quite a spread. What option is that?

 

This was for a Nov call, but all the options seem to have a spread of .50 to 1.00, with most in the 10% to 20% range.

The underlying stock is also kind of fun... often has a spread of .40.

 

Low liquidity is horrible when trading options. That's why I like to watch options on QQQ, the major Dow 30 and other major companies.

Personally, if it doesn't trade more than a million shares a day, I wouldn't touch it.

 

Aphie is right. Unless you have some incredibly good reason to do so (and that reason can withstand an SEC investigation), avoid these roach motel options.

 

There you go again; missing parts of the game because you think you know the answer.

The smarter they are, the longer it takes ...

 

metoxx, two of the wisest remarks i've seen on the boards to date.

 

Def,

Thank you.

Do you know anyone trading arb strategies out of Tahiti or Fiji?

Michael

 

Not at the moment, I knew of one guy in Fiji but I think the problems with the gov and infrastructure made him decide to move elsewhere.

 

Knew guys that traded out of Vanuatu. Or at least they were incorporated there. They operated out of Monte Carlo. All about taxes on both ends. They tried Fiji first, but the govt. was not cooperative.

They set up a trading company in the US. (I unfortunately worked for them and got ripped off). What they did was set it up so that 95% of the profits from the American Corporation went to the Vanuatu corporation as a "consulting fee".

Sad story. Nice places though