Secret 81DON’T TIP YOUR HAND—BEWARE OF SIZE

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A classic error made by many option players is that they

enter too large an order, resulting in poor executions or fills.

Whenever you see an option quote such as 2 at 2.50, at that

moment the asked price of 2.50 is guaranteed for 10 contracts

and the bid price is guaranteed for 10 contracts. We call that “10

up on a side”. (One exchange suggested that they were going to

20 up on a side.) If you enter a larger order, the market makers

will adjust their bid and asked price against you.

As a result, try to avoid tipping your hand; enter orders of a

maximum of 10 contracts at a time. Once one order is executed,

you can enter another. Eventually the market makers will catch

on to your play, but initially you will get better prices.

A classic error made by many option players is that they

enter too large an order, resulting in poor executions or fills.

Whenever you see an option quote such as 2 at 2.50, at that

moment the asked price of 2.50 is guaranteed for 10 contracts

and the bid price is guaranteed for 10 contracts. We call that “10

up on a side”. (One exchange suggested that they were going to

20 up on a side.) If you enter a larger order, the market makers

will adjust their bid and asked price against you.

As a result, try to avoid tipping your hand; enter orders of a

maximum of 10 contracts at a time. Once one order is executed,

you can enter another. Eventually the market makers will catch

on to your play, but initially you will get better prices.