Options 201: Beyond Obi-Wan-Kenobe Message Board

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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe

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To: Dan Duchardt who wrote (998)	5/5/2004 12:21:28 PM
From: Esteban	Read Replies (2) of 1064

How do you option traders deal with the much wider spread in options than the underlying? This has always been a deal breaker for me. Recently I looked at bid/ask spreads hoping that the increased competition from the various exchanges would have narrowed the spread to an acceptable level. Here's what I found for a fairly high volume stock, Yahoo, today at 12:05 PM EDT. Yhoo: 53.68 bid 53.69 ask May04 50 calls bid 4.3 ask 4.4 May04 55 calls bid 1.3 ask 1.35 In all cases over a few minute period the spread would double at times. So the underlying would be .02 and the option would be .20. I'd say that the option spread generally was about 10 times the bid/ask spread of the stock. When things are moving, more like 20 to 50 times. I've checked a few other symbols that I'm interested in. The spreads are similar. I'd like to try trading options with a swing trading system, but I'm afraid the cost is just too high for my system. Am I looking at the wrong strike or expiration, or otherwise missing something? Esteban

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