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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: BDR who wrote (771)5/23/2001 11:19:01 PM
From: Uncle Frank  Read Replies (2) of 5205
 
>> Fidelity quotes give me 4.30 X 4.40. and you have 4.20. Hmmm. Must be different exchanges?

You bring up an important point. Options are traded at 5 exchanges in the USA,

Chicago Board Options Exchange
American Stock Exchange
NYSE Options & Index Products
Pacific Stock Exchange
The Philadelphia Options Exchange

and there can be surprisingly large variations bids, asks, and spreads offered in the case of a fast moving option. Some brokers supply quotes based on one exchange, while others, like Fidelity, provide composite quotes (the highest bid on the 5 exchanges paired with the lowest ask on the 5 exchanges). If you place a market order with no instructions, your broker will route the order to the exchange of their choice - the one where they have an agent or the lowest contracted cost.

In the case of my broker, Fidelity, undirected orders default to the cboe, but if I am trading 10 contracts or more I have the right to direct the order to the specific exchange offering the most favorable price. In order to do this I need to get a quote from each exchange through my rep, and have to place your order through him, not on line. The broker fees are higher, but in some cases the price differential justifies it.

Since all of this varies from house to house, I'd suggest everyone check with their own broker to find out their specific system.

duf
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