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Do you typically use limit orders or market orders for buying and selling options?
Answers
391 points
300 points
CG answered one year ago …
Market orders if I am buying while markets are open and I see there's enough liquidity on offer to cover my order.
Limit orders if entering trades in advance or outside market hours.
989 points
rvilmur answered one year ago …
Use limit orders for options unless you must close a current position. Market makers bid and ask quotes are only good for 10 contracts; so on larger market orders they will move the bid or the asked in their favor.
When entering a position I will use a limit order and either split the bid ask spread or even use the ask price when selling and the bid price when buying in case a market order comes along that will produce a cross trade. Also the stock price may move after you place the limit order causing the bid or ask price to move to your limit.
It generally does not pay in the end to chase an option with a market order. Again only do that when you absolutely need to close a position.
380 points
SirCrashton answered one year ago …
rvilmur's advice is the best. Limit orders when buying options, whether the markets are open or not, allow you to control the cost of your trade. They also prevent you from chasing a trade which is contrary to Teeka's excellent advice to let the trade come to you.
I have placed limit orders below the option bid price, had the orders filled a day or two later, and realized greater gains when I sold the options by paying a lower price up front.
As mentioned by rvilmur, market orders are most useful when you have to get out of a position quickly that's going against you or if you are satisfied with your profit and just want to close out a trade.
180 points
musti answered one year ago …
Usually limit orders if I buy on a stock exchange; for selling also unless it is urgent.
However, I also like to buy warrants directly from the issuer; then I decide on the spot whether I want to buy for the price offered.
435 points
larryat36 answered one year ago …
Buying in use a limit order to buy at your selected price. When getting out and you have made your profit or the trade is going against you sell at the market and be done with it, especially in the case that there is a amall spread as in very liquid stocks.
Read more from larryat36450 points
SallyG answered one year ago …
Since I'm generally investing in larger companies that I intend to hold long-term, I generally use market orders, unless there has been particular volatility. When I am buying a lower-priced stock or one thinly traded, I use limit orders.
Read more from SallyG114 points
kr8ve answered one year ago …
Limit orders! Why? You want to be in control of your risk and want to make all the decsions about how much you are willing to pay for an option position. If you don't get your price, you move on to the next trade. Given all the market swings, using market orders on the buy-side, you may find yourself paying too much for your entry position. On the sell-side, I usually want to get out, take my profit and move-on, so I generally use market orders.
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