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Altif - My comments intermixed with yours in CAPS. THE CRUX OF THE
ISSUE IS ADDRESSED IN YOUR POINT #3. Steve
ALTAF JUMMA wrote:
>
> Hi RTrs,
>
> I ran into the following problems while trying to help a friend trade stock
> options under fast market conditions:
> 1. Internet based PC Quote was too slow sometimes the option price was 2 or 3 point off the broker price. AOL was the internet provider.
==>AOL IS SLOWER THAN A LOCAL ISP AND INTERNET IS PROBABLY SOMEWHAT
SLOWER THAN A LIVE SYSTEM SUCH AS DTN SATELLITE OR INSTITUTIONAL SYSTEMS
FROM REUTERS, BLOOMBERG OR BRIDGE.'
> 2. On the other computer we had charts of stock price from rttrader
> internet based also, the difference in the stock price between the two > service was 2/3 points at times -one service would be faster at certain > times slower at other time. The internet provider was AccessPro. ==> ANOTHER REASON TO GET OFF THE NET.
> 3. My friend had an account with Waterhouse Securities. Using market orders to get in and out cost a point or two off the option price for example if > the price on the option was 11 if we were getting in we would pay 12 or more, if we were getting out we would get 10 or less. Since then we have started asking the bid and ask and put a limit order at the ask sometimes we would have to cancel and replace order a few times because the price moved away. ==> I THINK THE BIGGEST PROBLEM YOU HAVE ARE STALE OPTIONS QUOTES, NOT A PROBLEM WITH YOUR QUOTE SERVICE. THE CBOE (OR ANY EXCHANGE) DOES NOT CONSTANTLY UPDATE QUOTES ON EVERY OPTION, SO WHAT YOU ARE SEEING IS LAST TRADE. IF THE STOCK HAS MOVED SINCE THE LAST TRADE, THE OPTIONS PRICE COULD BE FAR AWAY FROM WHAT YOU THINK IT IS. ALSO, YOU DO NOT KNOW WHETHER THE LAST TRADE WAS BID OR ASKED. YOU ALWAYS NEED TO HAVE YOUR BROKER CALL THE PIT TO GET BID/ASKED UNLESS YOU HAVE AN OPTIONS PACKAGE THAT SHOWS VOLS SO YOU CAN GET AN ESTI!
MATED PRICE BASED ON CHANGED STOCKS PRICES. THE ONLY SAFE METHOD THOUGH IS GETTING THE QUOTES. YOU SHOULD BE PLACING YOUR OPTION TRADES BASED ON MOVEMENT IN THE UNDERLYING ANYWAY.
> 4. Web-based trading was useless - we had to use the telephone.==> PROB RIGHT FOR OPTIONS.
> 5. Internet service was over ordinary telephone line.==> INTERNET IS ALWAYS THE LEAST RELIABLE, BUT SPEED OF LINE PROB HAS RELATIVELY MINOR EFFECT ANYWAY.
> 6. Our computers with win95 did freeze a few times as it normally does. ==> TRY WIN/NT OR IF U TRUST IT, UPGRADE TO WIN 98 (ABOUT $90). IF YOU GO THE NT ROUTE YOU WILL HAVE TO BACK UP YOUR HARD DRIVE COMPLETELY AND RELOAD IT I THINK.
> 7. Our trading style was short-term (2 or 3 days} at times day-trading. ==> USE WHATEVER STYLE U R COMFORTABLE WITH. REMEMBER, THE BID/ASKED IS LARGER FOR OPTIONS THAN STOCKS.
> 8. We didn't use Black-Scholes or worried about volatility-just use call and put for directional trading in lieu of stock.==>SEE ABOVE COMMENTS.
> 9. I am a newbie as far as stock option trading is concerned. I have traded futures for a while. I liked stock option trading inspite of the problems.
> Considering the following options for trading:
> a. Switching over to Windows NT from win95.==>SEE ABOVE
> b. Switching over to DTN satellite based quotes.==>NOT A BAD IDEA
> c. Switching over to Dreyfus or Investrade for lower commisions. ==> IF U R DOING YOUR OWN WORK, FIND LOW COMMISSIONS WITH REPUTABLE BROKER. AGREE WITH YOU COMPLETELY, ESP IF U R DAYTRADING COMMISSIONS ARE REAL IMPORTANT.
> d. For Web-based trading, using newer technology like cable modems etc. ==> DO NOT KNOW HOW MUCH THAT WILL HELP YOU. THE INTERNET IS A PROBEM, PERIOD AS IT GETS TIED UP, AND NOT REALLY FROM YOUR END. A RELIABLE PROVIDER HELPS, BUT YOUR OPTIONS TRADING PROB REQUIRES PHONE INTERVENTION.
> e. Considering other trading execution system used by professional
> traders- Instinet is only for companies. Also getting access to
> after-hours trading if possible. ==> KNOW LITTLE ABOUT THIS.
>
> Looking for suggestions from other traders.
>
> Soory for the long post.
>
> Thanking you ,
> Asif
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