For our official position to get filled and placed into the portfolio, the option price has to be within our buy range from the time the email leaves our office until we decide to cancel our orders.
If the price is in our buy range, even for a little while, then at least some of you are able to get in, and thats when we have to start tracking the position officially. We try to set the buy limit slightly above the most recent high price for the particular contract. That way, we expect more investors to have an opportunity to get into the position.
So, lets look at this in practical terms. We have option XYZ trading at a bid/ask spread of $2.70 by $2.90.
So we recommend paying up to $3 per contract in a dispatch that goes out at 11:30 a.m. Our team begins watching that contract at 11:30 to see how its trading, paying particular attention to trading volume. We can see as trades are filled and at what prices theyre filled.
In this particular example, if we see hundreds or thousands of contracts filled between $2.70 and $3, we know our readers are getting in. But then the position closes that day at $3.10. Our official price is $3 even though we know trades were happening well below that price, and we start tracking it from there.
Unfortunately, there may be times when some people dont get in at the recommended price for any number of reasons.
So, well include a small update on a new trade in the following Thursdays dispatch. Well let you know if we did or did not get in. If we got in, but you were unable to because the price moved before you could get filled, well let you know if you should hold onto your limit order for a while longer.