Your theoretical price will be using implied volatility which will be based on the options price in the market you see where I am going, right? If your theo is at or above the mid (which it would be sometimes) and MMs are axed to sell, you will get filled. Theoretical option price is just an interpolation method, nothing more and has the same probability of getting you where you want to be as any other method.
@sle ...since this thread has run its course and you are here. I'll highjack and ask you a question if you do not mind. I swing trade usually using long ATM options as a vehicle. Concerning losses and getting out, if I am wrong would I be better if my original position was in a 60 delta ie: it moves to 50 and I'm tyring to exit at a loss ..or..starting at 50 delta and exiting at a loss at 40 delta ?? or is this to simplified ? thanks mostly asking from a spread perspective. thanks
An option dropping from 60 delta to 50 delta will lose more $$ than dropping from 50 delta to 40 delta.
Again, these answers (including mine) are just guesses as to what will happen. The best thing to do is live experiments with small orders (i.e. 1 contract) to see what really happens. And you will need a number of orders over time, perhaps 20 to 30, to have any statistical significance as to what is likely to happen going forward. Brooks
The model more-often-than-not, catches up with reality+the market, and not-so-much, anticipates it. If we're voting, I vote for experimentation, too.
Why may I ask? I am small mom and pop retail and usually trade options with wide bid/ask and little OI.