Know the upper limit of the premium (extrinsic value) you're willing to pay and set your limits there.  Of course, premium will change relative to your bid  price as the underlying moves - so, if you don't get filled, you can't leave your order in place for very long without adjusting it.  I almost always use spreads, so my calculation is a combination of long & short premium in order to arrive at the total premium I plan to collect (typically collecting premium vs paying it).  For the most part, I stick to options with much tighter spreads than what you're describing. 

    Interesting.  Unfortunately, this is all

    Posted by rojoch on 24th of Dec 2019 at 01:42 pm

    Interesting.  Unfortunately, this is all within Registered accounts, so I'm not allowed to sell-to-open any options except Covered Calls.  I can only buy Calls, buy Puts, and sell Covered Calls.

    It seems like the bid/ask spread widens when I place an order, hoping to draw me into chasing it.  If I adjust my bid price within a minute or so, the ask will continue to move up, even if the underlying isn't moving.  However, if I do nothing, the underlying will eventually start moving the bid and ask prices in tandem with it and if I get lucky, it will move through my bid price and fill.

    This happened to me with VNQ--an ETF that trades almost 6M shares per day.  The option bid/ask spread is currently almost 8% (1.90 - 2.05).

    Even on SPY options, I regularly see a bid/ask spread of 2% +

    Is it because there typically is such a big potential percentage profit to be made that the market makers know you'll tolerate more slippage on entry/exit?

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