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Look for something trading on more than one exchange .. all six would be nice. Look for something where the underlying is at least 5,000 shares up. Using open interest to estimate exit liquidity can sometimes give you a bogus number. Large open interest is a plus, but I have seen instruments with large OI where the entire OI ends up being one position and it's ends up being exercised to exit. If you trade American style options exit liquidity would include the choice to early exercise. American style options are all the equities, etfs and the OEX.
-----Original Message-----
From: realtraders@xxxxxxxxxxxxxxx on behalf of Dave
Sent: Sun 7/10/2005 1:30 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] OPTIONS: Predicting Liquidity
Hello,
I am going to trade options that are close to at-the-money with 30-60 days to expiration. If price movements are not positive, I will sell 10-20 days before expiration.
With that objective in mind, what is the best way of estimating which options are likely to have enough trading liquidity to be able to exit the trade in the timeframes above? Are there any rules of thumb, calculations or past experience indicators that work well?
Thanks in advance - Dave
Trading83@xxxxxxxxxxx
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