Normal wisdom (and most of the pundits) advise us to trade the midpoint of the
Bid/Ask spread.
Let me suggest another strategy?
Suppose you are trying to place a Put or Call option trade that has a Bid 1.00 and
Ask 1.30. The midpoint would be 1.15, and you would probably get filled at that
level.
My experience has been that it can often be filled for a few cents less. If the Bid is
1.00 my first bid would be 1.06 and then 1.11. (i.e. I go to the next whole number
.05 or .10 and the add one cent. You will frequently get filled at that level.
Getting filled closing a position will also frequently work using the same strategy
but in reverse (deducting a penny from the whole number).
On the above trade if you don’t get filled at the 1.15 midpoint add a penny and
you will often get filled (unless there is a lot of current volatility driving price).
For spreads, it is the midpoint that will usually get filled unless you choose to trade
each leg one at a time.
This comes under the concept that a penny saved is a penny earned?
Bid/Ask spread.
Let me suggest another strategy?
Suppose you are trying to place a Put or Call option trade that has a Bid 1.00 and
Ask 1.30. The midpoint would be 1.15, and you would probably get filled at that
level.
My experience has been that it can often be filled for a few cents less. If the Bid is
1.00 my first bid would be 1.06 and then 1.11. (i.e. I go to the next whole number
.05 or .10 and the add one cent. You will frequently get filled at that level.
Getting filled closing a position will also frequently work using the same strategy
but in reverse (deducting a penny from the whole number).
On the above trade if you don’t get filled at the 1.15 midpoint add a penny and
you will often get filled (unless there is a lot of current volatility driving price).
For spreads, it is the midpoint that will usually get filled unless you choose to trade
each leg one at a time.
This comes under the concept that a penny saved is a penny earned?
