I usually pay the ASK price when i buy (Long Call) stock options. But today i placed an order for the bid price on the option (it was at 4 in the morning were no spread prices so the only price open at that time was the lowest price). To my surprise the order went through AT the BID price-the lowest price. Is this a good thing? It also expires in December 2007.
2007-05-24 14:30:17 · 5 answers · asked by westphalia1 2 in Business & Finance ➔ Investing
You placed your order at 4AM, so any impacts of overnight/after hours trader were probably not factored into the quotes. Additionally, a lot of orders cancel overnight, so the bids at that time are not always good.
In general, depending on the liquidity of the option, you often can get filled between the bid/ask. However, when a stock is moving or if the market maker wants to be a butthead, he may push you to fill closer to the ask, especially if it's not too liquid.
That said, as long as the stock isn't moving too much at the time you put in your order, you probably have a little wiggle room to improve your fills.
Hope that helps!
2007-05-28 05:48:39 · answer #1 · answered by Yada Yada Yada 7 · 1⤊ 0⤋
Yes, once the option contract has reached its strike price, the option can be exercises. If you don't reach the strike price then you're not making money. There are bids/ask prices on options that have not reached their strike because these traders want to get out of the position they have taken on whatever contract they have. You can buy the contract if you feel that a commodity will go to that strike price. So, yes options can be traded for profit/loss even when they are out of the money.
2016-04-01 06:50:57 · answer #2 · answered by Anonymous · 0⤊ 0⤋
First, given that you could only see one price what makes you think you paid the bid?
I'll give you a hint, you didn't pay the bid, you paid the offer which just happened to be the lowest price.
In the future try to put in a limit order to pay the bid and let it sit for awhile. I bet you'll bet filled more times than not.
2007-05-24 14:55:57 · answer #3 · answered by Box815 3 · 1⤊ 0⤋
Did you buy a covered call? If so then it is a naked covered call which is not a good idea.
A covered call is when you sell a call option (bid price). You are giving the option for someone else to buy your stock at the strike price you chose. If the stock hits that price you are going to have to sell them the stock for that price. If you don't have the stock in your portfolio already (then it is a naked covered call), and you will have to buy it and give it to them.
2007-05-24 18:34:31 · answer #4 · answered by School Is Great 3 · 0⤊ 0⤋
Did the price trend down after the purchase? Or did it rise? The market makers can sell at whatever price they choose. It appears the inside market had some selling pressure and you got a deal.
Several friends of mine trade at the AMEX. I used to go down there as a guest and watching the whole process is not always as "efficient" as you believe. It's real people making value decisions every hour and sometimes burps in price happens. One set of options used to go up after "Trash Can" had his lunch and he would set up a large position in the stock. When he would sell i noticed exactly what you experienced.
So don't worry. Trade smart. Good luck.
2007-05-24 17:52:13 · answer #5 · answered by Anonymous · 0⤊ 0⤋