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kevin sheen wrote:
>
> OOOps...forgot to attach gif.
>
> Today I tried to sell call options on Heating Oil and found great difficulty to get filled with nice price.
> I'll try to do that again,,,,but I need some help on placing orders.
> Attatched a screen shot of the quote page of Heating Oil.
> I'll try to sell June Heating Oil call 4800. As you can see,,,last price was 30pts.
> But looking at Bid/Ask price,,,there's too much of difference. How can I get paid with best price?
> I can't bid nor offer,,,,since I'm not on the floor. I can't place just a limit order since it might not get filled.
> I wonder how any experienced option traders buy or sell.
> Any comments are welcomed....
>
> ---------------------------------------------------------------
>
If you place a limit order that is lower than the current ask price then
you have offerred the option at your price or higher, just as if you
were in the pit, right?.
As someone who (because of small account size) buys these somewhat out
of the money options, here's what i do: I'm no expert however, in fact
have traded only 2 years and only part of that options. I am posting
this both to respond but also to get feedback if what I'm doing is
stupid.
At the end of the day I choose the option I want. I plug the settlement
price and futures closing price into a simple spreadsheet that came with
TS and this then calculates calculates the options' parameters. I
choose where I would want to enter the futures tomorrow if I was doing
the underlying. I plug that price into the spreadsheet, and tomorrow's
date. I usually give a couple tics (or equivilently plug in 0.5-1%
higher volatility) to make it a bit more likely that I will be filled.
Then I place this as a limit order. Since I have offerred a "fair"
price for the option, if no one wants to do the other side I come back
another day or in another commodity. I do a similar thing in
liquidating the option (for me, selling it back). Except here if I'm
bummed with the trade, I might move the price intraday but probably
not. I'm more apt to just be liberal with the futures price i plug in;
sometimes i will use an "or better" limit price (selling it with a limit
slightly below yesterday's close) to create more or less a market order
but set limits on it.
This strategy is driven by the fact I can't watch closely during the
day. But it might be a start for you when faced with a b/a spread so
wide that neither are "realistic" prices. I think even if I was
watching the prices intraday, i'd put a good bit of weight on a
calculation from yesterday rather than isolated trades today which could
be quite a bit "out of line". The settlement isn't necessarily a trade
at all, but I believe is a calculation sometimes. As such it would take
into account how all the options traded and the how the futures closed
yesterday. So it should give you a "fair" price to start your
calculation from?? Then as the futures fluctuated today, you could plug
in the new futures price. The only disadvantage is you are working with
yesterday's volatility number not today's. (I assume the realtime
programs can take care of this.) Am I right or off-base in this
approach?
I find the picture you supplied v. interesting. I've wondered about
liquidity in options, and things like, are the even numbered ones more
liquid sometimes. Is there a place someone can get this who does not
have realtime or delayed data? My vendor just give options prices.
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