[stephenNUTS]

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Just bought (or put in the order to buy) some Jan 09 puts on crox. Its my first time trading options. Did I make a mistake by entering market order? I find etrade generally gets good market prices. Also what percent of your portfolio does it make sense to allocate per options position? Seems like 5% should be the max, right? Or does that decrease with longer dated options because your hypothesis is more likely to be correct and thus youll finish ITM more often (even if you dont get back your full contract buying price)

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Ahnuld,

A word of advice is NEVER put in market order for an option,I know the most liquid ones you wont lose more than .05,but on a stock like CROX,which I dont beleive has a highly liquid markt,(esp with alot of interest on the PUT side with stock so high)....the MM's will def. screw you at whatever exchage they trade that particular option.The spread alone on these types of illiquid options can be upwards of 20%

It also really has nothing to do with which broker you use(e- trade in your case),because if you are buying the underlying stock for instance,they can give you a better price just from their own inventory.

No broker-dealers carry inventory in the option arena,and they must physically go out and buy/sell it themselves on whatever exchange that particular stocks underlying option trades on

However when playing with options,the CBOE e.g. is ALWAYS going to get the best of it.Also by putting in a M/O for an illiquid option or any option for that matter,and the VIX/premiums are accordingly higher...you will never get the best of it with a market order.

IMO ...put out a "reasonably" priced bid/ask and let it sit there for awhile.Try and have the market come to you.

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