Are you trying to buy at the bid? Or did you send in a limit order to buy at a mid-point and the bid became your order? I agree the liquidity is not there yet for splitting the bid/ask perhaps, but I placed a large order at the ask to buy and it was filled immediately (i.e. no partial fill BS and move the ask higher).
Hey Coach, Many of us bought the Cottle book. I have not seen any discussion of it on here. Could you share with us what you thought was most important. Any other thoughts would be appreciated. Cody PS I did not find the book to be light reading!
I've been the bid for 3 days. The ask has been.20-.25 during that time. There's been no dipping to take me out. MM spread now 0.15-0.25. It'll be interesting to watch how the theory plays out. I like the concept, but I'm afraid Rally's right. If MMs don't buy, no when else is going to. If they just DON'T buy, who you gonna sell to? Not being arguementative, just analyzing.
Cottle's book is the kind where you read a page, know there was something cool and useful in the page, but you know you completely missed it and got to read it again. I jumped right to the chapter on wingspreads since I was more interested in Butterflys lately. I have not done much investing except a few Combos to Iron Flys on riskarb's thread but want to dabble more in them if I could. It is not so much that the information is completly new in Cottle's book, but a different way to look at things and the potential to look differently at the things you have been trading and gain more insight.
Well we have to differentiate between limit orders BETWEEN the bid/ask and orders to buy at the ask or sell at the bid. If there is a bid you can sell a certain amount of contracts. MMs ar enot allowed to sit on their hands, that is not making a market. They of course could have a wide b/a spread but there will be a bid and I still disagree that a spike in VIX to 40 or so will not budge the 20.00 strike calls or only increase them a dime or so. Personally I would rather not ever know the answer because this is the kind of hedge I really do not want to need
I wasn't going to revisit the vix topic since it was discussed at length and we will never know for a fact until it actually happen. Yes, i said 'until' not 'unless' But here is an observation i made today, so you all can take it for what its worth. When the vix spiked to $13.90 all MAY vix calls were worth only .05 cents more than what they were worth when the vix was at $11.40. that applied for the $10, 12.5, 15, and 17.5 calls. They all only jumped by .05 cents. So if a 2.5 jump in the vix moves the calls, even the ITM calls only .05 cents(judging by the bids), then whats the increase of the calls going to be when the vix jumps say 10-20 points from here? I know it's just a speculation and same logic may not apply during a black swan but hell that's all we have right now, is speculation. I guess since the ITM calls have any bids whatsoever then that's good, makes you think the 20 calls if they are ITM will have bids to sell them at.
Even if it was a bad tick, the calls have barely moved even the ITM ones and the vix is about a point and a half higher than when coach first posted about it. I still think that normal option pricing won't apply when the next black swan happens.
A move from 11.75 to 12.75 is not something a market maker need be concerned with on OTM calls expiring in MAY. I would nto expect the calls to budge at all really given their theta and low delta. After all, it is not a move of 2 or 3 points we are concerned with here. What you descirbed is not different than a stock at $34 moving to $35 and the $37.50 Calls not budging because the expectation is extremely low that it would move there. Also the ITM calls already have some time value premium so they would not move that much because the move in the underlying is already accounted for a bit in the time value premium. ITM options with time value premium do not really move 1:1. I think the odds of VIX getting over 15 until MAY expiration are extremely low given current market conditions. Remember it is a spike to 40 that we are hedging so I do not think a move from 11.75 to 12.75 will give us any real indication of how the calls will move when VIX triples in a day or so.