turtle, Thanks for the information-- looks like I got more research to do. I am surprised it only trades 8 contracts that day for that particular option-- I must admit I am shocked that a major stock that was a Dow stock a few years ago (AT&T) only traded about $1,000 worth of options for it's most in-the-money Call that particular day! I know option volume is lower than that of the stock volume usually since with options you are splitting up the possiblities 100+ ways with all the different strike prices + time frames, etc, and that less "retail" investors use options so that means there is less volume. But even so $1,000 since like practically nothing, I mean even me with my tiny account size right now might have possibly had a market impact on price of that option if you go by volume of contracts traded. But I have to look into it more.. I mean just based on your experience if you generally hold positions for an average of a week or two, what amount of premiums would you feel comfortable trading on without impacting the price? I'm talking about companies the size of AT&T. I do agree with you on finding a market maker or trading desk at that size to help out and/or splitting the trade into say 5 different parts through the day, buying/selling into liquidiity and these tactics may help at certain trading sizes. Mostly I'm just trying to determine if the stock option market has enough liquidity that a mid-sized ($100 million) fund could trade exclusively on that market. I know at a certain point you have to go into the currency options / commodity option markets which are bigger (and it is often desirable to go into them even at a small size for diversification purposes sometimes) but I'm trying to find what point it is that you are just simply priced out of the stock option market. If you get priced out with a relative small amount (say $2 million worth of premiums in a trade) then for managing a fund it might make sense just to skip stock options and go right into more liquid markets. That's what I'm trying to figure out. This is all academic right now right now of course since I have such small amounts of capital under control but possibly will have more significance if I finish R&D on my trading system later on. And if I knew for a fact the stock option market is just too illiquid to trade in serious volumes that it might make sense for me to stop my tests which are mostly equity based and instead focus on the currency/commodity side. But interesting stuff either way that is for sure Thanks again for the help! -Taric
You need to look at the volume that traded in all the options, not just one specific option. There may have been 500 or 2000 options of a similar strike that traded without your specific strike seeing much action. Also, look at the open interest in the similar options to get an idea as to how much they have traded. Trust me, if Morgan Stanley and Solly are trading the stock option markets -- there's plenty of liquidity. Vega
+===================== Ptunic; Good read ; & believe it or not AT & T sent me a bankable $20 for switching long distance recently!!! Might want to trade/invest both stock option & LIQUID underlying stock; would certainly want to watch both. After study of volitility - probability study helps also. For example i percieve you can compare other calls with T $20 July; may want to compare with ITM July call option indexes, GE, INTC... ===== Luv learning - Solomon, trader king