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Strategies & Market Trends : Option Strategies
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To: chris714 who wrote (1974)10/11/2018 9:57:22 PM
From: Thehammer  Read Replies (1) of 2591
 
Hi Chris,

Without knowing what platform you are on and how it functions. A spread order is by definition a two-sided transaction. Selling one call / put and simultaneously selling another call /put that is different based on time, strike price or both. Normal spread orders would result in both a long and short position differentiated as above Time / price/ both)

Example: SJM $102.17 I am short the October 105 (3.20 - 3.70) that I will roll next week (hopefully).

a normal spread might be simultaneously selling the Jan 105 (7.00 - 7.30) and buying the Janualry 100 (4.50- 4.80). You could establish the position by putting in two individual orders but it would be likely that you would sell the Bid side at $7.00 and buying the ask side for $4.80 for a net credit of $2.20. If entered as a spread order, at a minimum I would ask for the midpoint of both $7.15 and $ 4.65 net credit $2.50 plus you have less market exposure.

That is an example of a normal spread with both sides open.

In my case, Let's assume that I want to roll tomorrow (there is still quite a bit of time value left and that is what I watch closely).

The October 105 is (3.20 - $3.70) and say I want to roll to the Jan $105 although it looks like I could roll down to the $100 and still get a credit.

In this case, the October trade is closing and the Jan side would be open. I would start with a net credit of at least (7.15 - 3.45) = $3.70.

If you enter the trades as buy to close and sell to open individually, you are more exposed if one side executes and the market moves against you.

You may know most of this and I probably have some typos..

Also my own personal experience that you get better prices in the morning. Due to "Best Execution" I often get better than my limit.
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