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<FONT face="Bookman Old Style" color=#0000ff
size=2>Ira,
<FONT face="Bookman Old Style"
color=#0000ff size=2>
<FONT face="Bookman Old Style"
color=#0000ff size=2>Thanks for the feedback. Yes, this is taken into
account.
<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 9:58
AMTo: realtraders@xxxxxxxxxxxxxxxSubject: Re: [RT]
Minimum price increment
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.
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