Sometimes,
you’re making a completely reasonable request, and Mr. Market decides
to be an obstinate jerk. Yesterday afternoon was a great example of
this: we were routing some ordinary, run-of-the-mill spreads, and
trades that normally should have been filled right away at the mid
price (halfway between the bid and the ask) just sat there, even after
a morning of easy trading. Market conditions have a lot to do with it:
generally speaking, faster-moving markets will be more difficult to
trade than slower ones.
There’s no magic price that the market owes you. We’ve talked about getting your orders filled before, but here are some more general rules of thumb that can help you get in and out of positions in a timely manner:
- Use limit orders. Never, ever use a market order
to fill an options trade. You might as well call the floor of the
exchange and just ask them where to send the check, because using a
market order literally means you’re giving the market makers free
money. Always use limit orders.
- Use day orders. Never, ever use a GTC order to
enter or exit a trade. Only use day orders. An underlying can gap up
or down dramatically overnight, and if you have a good-till-canceled
order just dangling out there, it can easily get picked off during that
opening gap.
To read the rest of this post, just click over to our options trading blog...