<All of the traders who I talked to are on Porter's side ... >
Great -- hopefully you all can get through to the Toronto Press ...
Here's another side of Porter's posts (#114, from feb 97,
Message 754165 ):
[...]
You asked about the use of stop-loss orders in
options. I wrote a post about market orders, I
believe in response to Andrjez, so I won't go over
that aspect of stop orders. What I will describe
is that we accept two types of stops...stop and
stop-limit. (Check with your broker to see if I
have these terms exactly right, I don't have my rule-
book at home.) The first is a straight stop,
triggered if a board-lot trade occurs at your
stop price. It becomes a market order to sell, and
you should be cognizent of the open interest, daily
volumes and trading history of the series you have.
The second type is a stop-limit. It is triggered
by a board-lot trade at your stop price, and becomes
a quasi-market order, except it cannot trade below
your lower limit (on a sell). In an extreme case
where your stop-limit order cannot be filled, (if
you set the range too small i.e., stop $3.50, limit
$3.40, or the market is free-falling and there are
no bids in the underlying equity), your unfilled
order will be sent to your broker, who should then
contact you. I've only seen this one time in 16
years. (Wanna guess what day?)
This is getting a little long, but I'll take a
shot at your question about spreads. The exchange
has maximum allowable spreads of .25 on quotes
bid under $2 and .50 on quotes bid >$2.00.
(exceptions are made for Leaps and long-term TXO
series.) In applying for the appointment for a new
listing, specialists may commit to call tighter
spreads. There is no way to legislate liquidity,
though, so take a look at the open interest and
daily volumes of a class of options. Also take a
look at the quote for the near-term at-the-money
call. If it's $2.00 - $2.50, don't even bother.
Lastly, you asked why your bid/offer between the
market doesn't always show. Was it for 10 contracts?
Since all posted markets are good for at least 10
contracts, we don't post odd-lots. You are protected
against being sold-through, and sometimes you get
a better fill. If a fifty lot trades on the posted
bid, a good specialist will have you buy your 5
lot at .50 rather than .60.
[...]
Porter |
