Explore Your Options by Tom Gentile
THE COST OF DOING BUSINESS
How can you get your trades entered and exited at the best possible price?
One way to look at the bid & ask spread of a quote, whether it be on a stock, ETF, or option, is to consider it as a cost of doing business. I try and find options to buy with a spread no wider than a nickel ($0.05) in order to keep my cost of doing business small.
Here’s a quick example of an option quote. An XYZ Aug15 40C is trading at $2.00 x $2.10. If you were to buy one contract of this option, it means that you are buying the right to buy 100 shares of XYZ at $40 on or before the third Friday in August...