Re: [RT] Minimum price increment

["Ira" <mr.ira@xxxxxxxxxxxxx>]

I hope that your system includes the theoretical 
price of the options and a realistic way of acquiring the numbers to be 
used in the variables in option pricing.  Based upon your reply you 
are basing your bid/offer upon someone else's information, bid/offer.  The 
greatest risk outside of price movement in trading options is volatility risk. 
So you had better have a handle on finding the volatility of the underlying and 
being able to compare it with the implied volatility of the options.  To 
know whether the bids and offers are over or under valued is imperative in 
trading options. One thing to remember is that your overvalued options might be 
my under valued option.  It is all in the numbers used in the option 
pricing variables. Good luck in your search.  Ira.
<BLOCKQUOTE 
>
  ----- Original Message ----- 
  <DIV 
  >From: 
  Brendan 
  B. Boerner 
  To: <A title=realtraders@xxxxxxxxxxxxxxx 
  href="">realtraders@xxxxxxxxxxxxxxx 
  
  Sent: Thursday, June 12, 2003 7:27 
  AM
  Subject: RE: [RT] Minimum price 
  increment
  
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2>Ira, thanks for the 
  explanation.
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2> 
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2>I'm asking because I'm developing a system to remain on 
  the inside bid / offer.  I want to ensure that if I raise / lower the bid 
  / offer that I do so in such a way the honors the minm price increment 
  rules.
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2> 
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2>Regards,
  <FONT face="Bookman Old Style" 
  color=#0000ff size=2>Brendan
  <BLOCKQUOTE 
  >
    <FONT face=Tahoma 
    size=2>-----Original Message-----From: Ira 
    [mailto:mr.ira@xxxxxxxxxxxxx]Sent: Thursday, June 12, 2003 9:10 
    AMTo: realtraders@xxxxxxxxxxxxxxxSubject: Re: [RT] 
    Minimum price increment
    The minimum bid is for market makers standing 
    in the crowd and has nothing to do with you, other then the increments of 
    bid and offer.  There is also a maximum spread between bid and offer 
    that can be made in the crowd.  If the bid is $3 then the minimum offer 
    in the crowd, by a market maker is $3 and $3.10.  That doesn't stop you 
    from putting in an offer or bid at $3.00 or $3.10. If you put in your 
    offer at $3.10 you are competing with market makers and floor brokers that 
    are holding offers.  It used to be, that if you tell your broker that 
    you want your offer in the book, that book orders were filled before floor 
    orders and they were filled in the order booked.  What if the bid/offer 
    in the crowd was $3.00 at $3.50?  You can put a bid or offer anywhere 
    in the middle in $.10 increments.  Whether you would get filled or not 
    is another matter, but if your offer was at $3.30 it could read $3.00 at 
    $3.30 or a market maker could rest upon your offer and offer at $3.20 
    knowing that your offer was there if the price of the underlying starts to 
    rise.  When you cancel your offer the market might very well go back to 
    $3.00 at $3.50.  Your offer was the market makers stop loss. 
    To 
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