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Lalaine Espinosa wrote:
>
> Hi,
> I would like ask some opinion or advice about the option contract that I
> bought for $100.00 each. Last March 1, I placed an order with my broker
> (a weelknown one) to buy 10 Dec. Put crude oil 1450 at the market.Since
> it was trading at a premium of @1 or $10.00 per contract I expect to buy
> it higher than $10.00 but not more than $20.00.
> The next day my broker told me that I was filled at $100.00 per contract
> so I paid $1000.00 for 10 contracts.Is it possible for the distant
> contract to have this range? If you are a broker and you client place an
> order like this, are you going to buy this high? I'm thinking to
> liquidate these contracts, but I 'm afraid they sell them for $10.00
> again. Any opinion or advice on this matter is highly appreciated. Thank
> you.
>
> Regards,
> lalaine
A market order tells the floor broker to raise you bid until someone
bites. A good flr. broker would probably bid a fair price and then
raise it, but a busy or lazy flr broker, or one who owes a favor, might
just bid your price. In any case, your market order *requires* him to
get it filled at the best price he can get at that moment, even if it is
not "reasonable".
The total volume today on the Dec 1450 put was 10. I suppose it's
conceivable there wasnt' even an ask price until your order hit.
If you hoped for 1 and were willing to pay 2, then your order should
have been a limit order at 2. Or, you put in an order for 1 and then
change it if you don't get filled.
I don't think you can contest the fill. If you placed a market order
(and assuming your desk broker does not have discretionary control over
your acct.), he/she did the right thing by placing the order, and the
floor, filling it. However, if you have a broker advised or assisted
account, and he/she didn't question you to see if you really wanted to
place a mkt order in a thin option, then you are not getting very good
advice from your broker.
What's disturbing is that this looks like a routine thing for this
option series. Here's data from 3/1 for the Dec crude puts:
CL1400X020000301 1 1 1 1 2D
CL1450X020000301 10 10 1 1 2D
CL1500X020000301 10 10 2 2 2D
CL1550X020000301 15 15 3 3 2D
CL1600X020000301 6 6 6 6 2D
CL1650X020000301 8 8 8 8 2D
CL1700X020000301 19 19 11 11 2D
CL1750X020000301 14 14 14 14 2D
CL1800X020000301 27 27 19 19 2D
CL1850X020000301 25 25 25 25 2D
CL1900X020000301 31 31 31 31 2D
CL1950X020000301 38 38 38 38 2D
CL2000X020000301 60 60 48 48 2D
On 3/1 crude did spike up, but these puts are so far OOM, that I doubt
much of the decrease is due to that move. For example the diff. in
settlement prices in the 1700 put is betw. 2/29 and 3/1 is only 3 pts.
and today v. similar (from Nymex site),
1450 put opened at 9, closed at 1 (volume = 10)
1500 put opened at 10, closed at 2 (57)
I noted that the volume on the even strikes is consistently greater than
the xx50 strikes.
May I ask, how you arrived at the choice of the 1450 strike price?
Conrad Bowers
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