Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: The Perfect Hedge who wrote (566)	1/18/1998 4:56:00 PM
From: ----------	Read Replies (1) \| Respond to of 2241

Glen: If I said that, I aoplogize. In my experience, when I enter a buy order "at the market" on a thinly traded option, I normally get filled at the ask, sometimes below the ask. I must re-emphasize I am not advocating this, nor suggesting anyone else try it. I'm just reporting what I have observed. Let me try & give a rudimentary example of a spread, actually a real live experience. A spread is buying one option & selling another option. In MY case, I do it simultaneously, so the market doesn't move against me. I sold some TBR December calls. The stock went up & it would have been called away from me. So, I entered the following order: Buy Call 10 TBR December 110 .... Close Customer Sell Call 10 TBR January 115 .... Open Customer/ covered Net Credit 2 1/4 In English, what I said was: "Buy back the TBR December calls I sold, and sell the TBR January 115 calls. BUT, do it ONLY if I can sell the the January calls for 2 1/4 more than it costs me to buy back the December calls." The trade is only executed if both the buy & sell can be done at the same time, and for the difference I stipulated. The reason for doing this is my awful luck & miserable timing. If I just bought back the calls I had sold, the stock would drop like Wyle E. Coyote going over a cliff in a Roadrunner cartoon. Then I would not be able to sell a call above the cost basis of the stock. If I sold the calls before I bought back the others, the company would immediately release a news story that they just found a giant diamond mine in the front yard of their headquarters. The stock would go to $500.00 & I would only have 1/2 the stock I was obligated to deliver. (Obviously this "news release" is pure fabrication, but it gives you an idea of why my picture is next to "Murphy's Law" in most dictionaries. <bg>) Doug