Should these limit options orders fill?

September 18, 2010 by  
Filed under Option Trading

If you don’t actually trade equity options, please don’t answer. I need answers from people who have actual experience buying and selling options for real money.

(Note: I have traded options in a limited capacity for 8 years so I am not a neophyte. )

I am testing a new options strategy on SPY, the SPDR for the S&P 500 which is very active both for the security and its options. My strategy depends on getting in and out at prices of my choosing. I have been using the Virtual Trading engine at OptionsXpress to test my strategy and have found that it is not unusual to submit a limit order at the bid or ask and have it not fill. I am not placing large orders; a transaction of 5 or 10 contracts is typical. Consequently, it seems strange for me to enter a sell contract at 3. 25 and see the Bid/Ask sit at 3. 15/3. 20 and yet my order can spend several minutes in an open state. I understand that OE’s Virtual Trading is pretend so I am trying learn if in the actual markets, a small order at or better than the current price would be executed.
Thank you for your answer. I guess maybe my question wasn’t completely clear. I was trying to indicate that my ask was at or below the lowest bid (or that my bid was at or above the lowest ask), in other words that I was seeing a situation in which my transaction should have been executed but wasn’t and would stay open for an extended period. I have found that if I do market orders I get unpredictable fill prices so I would enter an order at a point such that I would know where it would fill if it did in fact fill.
Concerning “large orders” that was also part of my confusion. It was my thought that small orders at the proper bid or ask should execute. I could understand if an order for 500 contracts were to remain open but people actively in the market seeing an order for 10 contracts at the ask price would snap it up as easy money in a rising market trend. I am intentionally trying to keep my contract sizes such that there would be no impediment to my order being filled.
I see now that as hard as I tried to write my original question correctly I got it wrong and wrote my entered ask above the lowest ask and proposed a situation that would not result in a sale.

Is selling stradle option on SPDR exchange traded fund(SPY) a good strategy?

September 12, 2010 by  
Filed under Option Trading

I am an individual investor who is using the options of the bottoms negotiated in stock market for the growth of capital at the moment. Selvage the two options of sale and purchase of SPY (S & amp; P500) near the present price of market. Also I buy puts of protection. I generally sell options of two months of low maximizing the return of my investment. Can you say to me if it is a good strategy and insurance?