Code since youâre a retail customer you always get the NBBO and those markets are 50 up. Therefore if you wanted to hit the bid or take out the offer youâd get a guaranteed fill on the NBBO. Options on the DOW stocks are generally very tight and a lot more than just 50 up too since theyâre all listed on many exchanges. You will never ever tax the liquidity of the options market in those as an individual retail trader. Good Luck and have no fear about liquidity in those issues
Walt, Truthfully, I never trade calendar spreads as stand alone positions, and don't have enough hands-on experience to give you an opinion. But, I do trade double diagonal spreads (iron condor plus calendar strangle). These spreads are vega rich. I do like to own double diagonal spreads - but only when I consider the implied volatility to be low (or least that it will increase during the time when I own the spread). My conclusion is that the IV story should be the same. Rather than look at the calendar strangle as a play that benefits when the underlying trades in a narrow range, to me, the primary purpose of the calendar strangle would be to gain from an increase in implied volatility while the stock trades in a narrow range. Sadly, that's not a very likely scenario I'm sorry I cannot supply an answer to the question you asked. What I can tell you is that my comfort zone prefers the iron condor. I'm not suggesting that you should prefer it. Mark
xflat has it right. I use my broker's software, but I hear Hoadley's stuff ($100 or so) is pretty good for a low price. Mark
Good discussion, guys. I want to comment on bid/ask spreads. If you are thinking about "day-trading options", then trade only in options that have extremely good volume and a reasonable spread in the bid/ask prices. Otherwise, you'll have a lot of slippage. To find options that meet this qualification look only at the most actives list for a few days. At that point you can make a list of about 10 most suitable candidates. You'll also want to have a pretty solid stock trading volume to support this, but I'm certain that is pretty well automatic for all the stock options you will have on your list. Don't confine yourself strictly to the DOW 30 stocks. You'll find others like AAPl, and NDX will also work well (even though the bid-asks are wide on NDX, they are supported on several exchanges and the market makers compete well). I have traded the NDX quite a bit and rarely had a problem with fills at 5 to 10 cents off the mid. I agree with Mark on the lot size--10 to 20 spreads are a piece of cake at virtually anytime, and more than that 90%+ of the time. As for as options brokers go, TOS and IB are your best choices. IB has slightly better commissions (but charges for cancels, which I do regularly in search of a better deal). TOS support is outstanding--I've NEVER had any trouble talking to them and they will negotiate commissions if you do a reasonable amount of business. Merry Christmas!!!