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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: 4 - Bob who wrote (6660)	2/6/1998 8:26:00 AM
From: Herm	Read Replies (3) \| Respond to of 14162

Hi 4-Bob, On lower volume and lower priced stocks like HMTT at times it may be difficult for the MMs to slice a 1/8 to 1/4 point off the bids/ask for themselves. So, market orders are easy shark bait for MMs. They are going to hit and run with your money!!!! The VVUS shorts finally got a down day yesterday. I picked up 5 VVUS June 15s Calls which I plan to exercise when the stock hits $20.00. That way I can enter into a buy/write in a profitable mode. The June calls should be plenty of time for VVUS to get things back on track for 1998.

To: 4 - Bob who wrote (6660)	2/7/1998 1:54:00 AM
From: Greg Higgins	Read Replies (2) \| Respond to of 14162

4 - Bob writes: I changed my limit order to a market order. It's a bit too late to say, "Never place a market order to open a position," but I'm going to say it anyway. Never place a market order to open a position. Yes, I violate this rule from time to time; no rule covers all situations, but take it to heart, let it guide you and you'll eventually discover the few exceptions. Secondly, changing the order from limit to market when the bid was 1/2 and the ask was 3/4 to a market order just because you couldn't get filled at 5/8 was either naive or arrogant, I can't decide which. The minimum tick change for prices of $3 or over is 1/8. The minimum tick for prices under $3 is 1/16. With a 1/4 spread, you demand 1/8 and you didn't get it. I'm not shocked. You should have changed your ask to 9/16 and maybe you would have gotten it. In order to make a marketmaker give you a fill inside the spread, you have to make him (or her) uncomfortable. On stocks which everybody trades, they might split the spread if there is lots of action and they don't want to narrow the spread. In a stock like HMTT, where the last trade took place the day before, that doesn't make them uncomfortable. They'll let it change, and maybe even lower the bid. The way to make them uncomfortable is to narrow the spread so much that if they don't respond to your ask, they risk someone else using your ask to go the other direction. If you try to write at 9/16, you become the offer. Someone looking to buy a call, gets to buy at your offer price. They don't want that. They want 3/4 to be the offer. They become uncomfortable and fill your order. I know of bunches of people who will spend days trying to get that extra 1/16 and they have both the patience of Job and the will of Stalin. Also, you have to know where your order is being placed. HMTT options trade at the CBOE, AMEX and PhSE. When your broker sends in the order, they send it to only one of those exchanges. You only need get the bid at that exchange. Next time, get all the bid and asks from your broker and have her (or him) direct the order to the exchange with the highest bid. This isn't always done. I can envision a scenario where the broker submitted your limit order into an exchange; then later you changed your limit order to market. Your broker, instead of cancelling your limit order and creating a new market order, probably just did a cancel and replace at the exchange where the order was already active. You get an instant fill at the exchange when the bid is 5/16. Have a talk with your broker.