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Options have a one price opening in the OEX, unlike futures. Therefore buying
or selling pressure will effect the opening price. The OEX pricing is keyed
from the SnP and not the OEX index. At least that is the way it was when I
traded on the floor. You should know the fair value of the option you want to
purchase at the various prices of the index. You should know the
interrelationship between the OEX and the SnP. Once you establish value you can
put in a price. If you say you are willing to pay $4.00 per call then put in a
limit order. If it opens less then $4.00 you will be filled at the opening
price. If it opens above $4.00 you have a chance to reconsider your trade. If
the demand is great they may open way overvalued and after the opening return
to value. Right now the VIX is about 31 ( the last time I looked). There is a
large volatility risk in the OEX at this time. It takes huge size to impact
the OEX pricing or a little sentiment change. Ira
Wayne Moody wrote:
> Questions about buying on the open:
>
> 1. What is the recommended way to order if I want to buy on the opening
> when the series is expected to open lower, and I want to invest a certain
> dollar amount? The best guess might be 3 5/8, but anything between 4 1/4
> and 3 1/4 is possible. I want about $5000 worth at the opening price,
> whatever it is.
>
> 2. On this kind of opening, when the series will open lower reflecting
> action in the S&P futures, how much effect do initial orders have on the
> opening price? I mean, if the market maker deems 3 5/8 the fair price based
> on the futures, so that without any orders he would initially quote
> 3 1/2 - 3 3/4, is that determination modified because someone wants
> to buy or sell 20 or 30 at the market, or will it be 3 5/8 regardless?
> I'm speaking of moderate size, not big-time pressure or support.
>
> Another angle: if I order 20 at limit 4, will the price tend to be higher
> than if I ordered 20 at the market? Or no difference?
>
> W.M.
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