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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: RWS who wrote (11205)7/16/1999 12:23:00 PM
From: tuck  Respond to of 14162
 
RWS,

It's a question of liquidity, and it's the same for buyers and sellers. If I was dealing with a large position, the small OI and volume would be an issue. It would be analogous to a fund trying to buy into (or sell) a small cap stock without moving the price in an unfavorable direction.

In practice, I would take a small position (a few hundred shares) in SRCL, and would be selling calls at the bid. It is unlikely I could do much better than that, but I've not done worse, either. Limit orders probably make more sense here, to keep the MMs from screwing with the bid/ask after they've seen your market order.

I won't pretend to be the most educated option trader here, though, and comments and corrections are welcome.

Cheers, Tuck



To: RWS who wrote (11205)7/16/1999 5:26:00 PM
From: Herm  Read Replies (2) | Respond to of 14162
 
Well, most of the time I'm looking at the seller's point of view. I want a market to sell my CCs and be able to cover if I need to exit. It sure is easier and more profitable with a larger open interest. There is a greater chance of buyers making mistakes on their opening transactions because of their greed and higher fluctuations in the option pricing when the MMs are jerking them around. Call buyers more often tend to over pay fair value.


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