Option liquidity

Discussion in 'Options' started by crazytrader1, Apr 7, 2007.

  1. Hello everyone, I always wondered about options and the liquidity. It seems like you can make a good amount of cash if you play options right, the thing is, it seems people will reach a point in which theres not enough liquidity to trade with large amounts of money.

    So my question is, how much money can people make in options trading comfortably, until liquidity becomes a big issue.

    I know that some stocks are very liquid, and some others are not. But I was just wondering when will liquidity be a big issue for a large amount of stocks, and when will it be bothersome to find stocks that provide enough option liquidity?
     
  2. If you really want to day-trade options, you need to be the market maker.

    Otherwise the commissions and fees (especially cancel fees) will kill you.
     
  3. Well actually i've been swing trading options, and i've been doing quite well, 80% success rate. I have goals to become wealthy, but i wonder, how high will options take me. I dont day trade options, nor would I try.
     
  4. I don't understand what you're trading. Options in liquid products are priced extremely fairly. Every participant is forced to take a directional view on the underlying, realized, or implied volatility. The main advantage for the MM is their access to order flow.
     
  5. RL8093

    RL8093

    I strongly disagree with this assertion. Long options as a leveraged proxy for long/short stock positions is incredibly profitable. Even short options in the right situations can generate significant profit.

    My apologies if I'm somehow misunderstanding your intent but I'm struggling to grasp how you can make that statement....
     
  6. ssss

    ssss

    It seems like you can make a good amount of cash if you play options right, the thing is, it seems people will reach a point in which theres not enough liquidity to trade with large amounts of money.
    ------------------------------

    If you have view of level 2 options book ,in case of options
    on qqqq you would see multiple bid-ask price and volume for options (1-2 $) from different exchange's

    Volume of each bid ask would more as 1000-3000.
     
  7. "It seems like you can make a good amount of cash if you play options right."
    "Well actually i've been swing trading options, and i've been doing quite well, 80% success rate. I have goals to become wealthy."

    Wow, good luck with that; luck being the operative word. You can certainly make a lot of money buying options if you know where the underlying is going. As to your liquidity question, it depends on what you are trading. You can trade tens of millions of dollars in the indices, but with very illiquid stocks you will not receive a "fair" bid/ask if you try to trade hundred of contracts. You can certainly do it, but you will have to pay a little more when you buy, and get a little less when you sell.
     
  8. I never said swing trading options isn't extremely profitable, it is!

    I said day-trading options is very difficult, because most day-traders are looking for small movements in the stock price.
     
  9. ssss

    ssss

    I never said swing trading options isn't extremely profitable, it is!
    ------------------------------------------------------------------

    Dear Sir

    You are false.

    As with each highly leveraged instrument high profile possible
    100% loss alsov .

    Example
    Catch day of high volatility,which is expiration day
    for weekly SPX,OEX
    (OEX hi lo in this day 10-15 points, spx 20-35 point)

    operator buy near money OEX options ( with B/S 2-2.7
    for oex as example )
    Profit in excess of 300% possible ,but in most of the case's
    only after multiple 100 % losse's.

    Author point of view ,that excessive profill related to high
    chance of 100% loss

    Most famous directional option trading operator
    www.markdcook.com have had multiple excessive losse's
    near bankruptcy.

    For one operator as Mark D Cook ,more as 1000-10000
    have had equal losse's ,but no profit to end of the game.

    If you have no family and ready to risk all ,you can try.

    3 consecutive win in black with double bet by roulette would make from 2000$ - 16000$ for hour . Possible ( 10 consecutive
    black or red in casino is not very rare )

    But who is ready to risk ?

    Your respectfully
     
  10. are u really that stupid or just play one on ET ?
     
    #10     Apr 8, 2007