Entering a Trade

There are two main ways to initiate an “opening transaction” for an option. Similar to buying stock, the purchase of an option can be accomplished by means of either (1) a market order or (2) a limit order.

My recommendation is to never use a market order in an opening transaction. The best that you can do is to be filled at the ask price, and quite often you will do worse. If your order is for several contracts, you may find that only a few are filled at the ask before the price slides to a higher level for the remaining fills.

In a fast market where option prices are changing quickly, you may believe that you will only succeed in entering the trade by the use of a market order. In such a situation, you will be placing yourself ...

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