Hello, I have never traded options before and found that the spread is quite wide in options. In order to minimize the spread cost , what type of order should I use and sequence should it be when I open a position selling a put credit spread? And how about closing it? Thx for your advice.
Why not stick to the hundreds of stocks, indexes and etf, whose options are multi listed and where the spreads are tiny?
You may want to consider the ETF options. Especially the SPY (or DIA, QQQs, IWM, etc.) In the case of the SPYs there's heavy volume, lots of open interest, strikes a point apart ($100), penny pricing, 100% electronic trading, and very narrow spreads. I started a couple of years ago with the SPYs and like them so much I am still trading them. I only trade credit spreads and use limit orders going in and coming out of a postion. Best Rick C.
There is no free lunch. Wider spreads are usually found trading futures options; even the ES options have wide spreads. Since commissions and fees are generally low, this savings is made up by wider spreads. Nothing is free.
This is where you need to have a trading plan. If you are in a long term (multiple weeks) position, the spread is inconsequential on liquid markets. The floor needs to make money on the short term, and your position then makes you money long term. I simply include the commissions and the spread (my actual cost) in my calculations in determining my r/r. Finally, with experience, you will find that the end of day price will be what you paid for the position.