One of the biggest concepts a lot of traders—especially beginners—have trouble with is option entry prices. Every move is pivotal when trading options, and the option entry price you potentially get can set the tone right from the start, and make or break your trade.
In his recent appearance on the T3 Alpha Show, Scott Bauer was live from the CBOE floor, where he was asked the big question:
What can people do to improve prices on their entries?
Scott gave a multifaceted answer that might not be what you expect. Scott gave a candid—yet insightful—response, where he dropped a surprising statistic about 70% of option trades, one tough reality that people need to accept about trading, and the significant difference traders can potentially make if they decide to stay on the sidelines.
Scott’s response covers a number of details, including:
- 70% of options trade somewhere in the middle of the market, and why it matters
- Why it’s important to ask how badly you need to buy an option (and why)
- The role nickels and pennies can play in option entry prices, and why the small change could add up quickly
- The similarities between trading options and eBay (ie auctions)
- Why Scott thinks testing the waters is a good way to improve option entry prices—especially beginners
- The importance of accepting that sometimes, you’re not going to get the trade you want
