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

To: Dan Duchardt who wrote (10121)	3/29/1999 12:16:00 AM
From: tuck	Respond to of 14162

Dan, To be honest I am not sure about this, and it's a fairly minor point. We don't see a bid/ask on our screens, perhaps the guy taking your order does have that. And perhaps if he shares it with you, that will offer a tad more guidance in determining the net you want to try for, than simply being told the last. But not much, really. The spreads on the NYSE stocks are pretty tight, I think. Cheers, Tuck

To: Dan Duchardt who wrote (10121)	4/3/1999 11:24:00 AM
From: NateC	Read Replies (2) \| Respond to of 14162

Dan....there is a great section in Ken Trester's book "The Complete Option Trader" that you might enjoy reading. He covers a lot of the bid/ask kinds of info we've been throwing around on this thread of late. In one of the last sections entitled"Professional Trading Tactics" he says that when your options are traded at CBOE...(manyif not most are), you have 3 types of people: 1. Floor Broker 2.Market Maker 3. Board Broker when you place a trade with Dreyfus, Etrade, or Schwab or any broker..the trade goes from your broker to the floor of the CBOE where it is received first by the floor broker who works for our brokerage firm (Schwab, etc). Floor brokers are sometimes called "$2 brokers", because they used to get $2 for each order. If you had a trade for, say DELL May 35 CC's, he takes the order for CC's or whatever your trade happens to be, to the DELL pit. In the DELL pit, there are many market makers trading for their own account, and maintaining, or "making" a market in this particular option, say you're selling the May 35 Call. The market maker maintain's the market in that particular option, and tries to profit while doing so. On the NYSE, the difference is, that there is only ONE market maker (specialist) who makes a market in a particular stock. The floor broker is holding our order to sell the May 35 CC, and he calls out the order to the market makers, trying to get someone to buy it at our limit price...let's say, for discussion purposes, it is 7 3/8 by 7 5/8. Our order is to sell 10 contracts at 7 1/2. He tries to get one of the MM's to buy at 7 1/2. If none will buy, all holding out to by at 7 3/8 or lower..THEN, the order then goes to the Board Broker. Now the Board Broker is unlike the MM, because the BB does not trade for his own acct....but rather is an employee of the Exchange. He will list in his book/computer our order to sell at 7 1/2. It then has priority over any other order...except for orders which went into his book earlier. If and when the bid price moves to 7 1/2, the order will be executed immediately. Your brokerages man...the Floor Broker.....does not receive any compensation however when the transaction is handled by the Board Broker. Hence, he is incentivized to get the MM's to do the deal with him.......otherwise he loses his fee. I don't know if McMillan's book has a section like this....but Trester's book is VERY good, especially in this section. hope this helps someone.