All traders are equal, but some are more equal than others

[Fox]

I am referring to retail vs institutional traders of course. Some examples include commissions, inside info etc.

One thing I noticed recently was that of option prices. I had some WOTM Woolworths (WOW) puts recently which I was trying to close. Fair value was approximately $0.007. As a retail trader, I could submit a sell order for either $0.005 or $0.010 as the order price increments were limited to $0.005.

On the next morning, I noticed the the previous close of the WOW put was $0.008. This meant that some trader was able to circumvent this $0.005 increment limitation. This also meant that retail traders who can't circumvent this limit are disadvantaged. Eg. I am only able to sell for $0.005 if I chose to close, but the successful trader obtained $0.008 ... a 60% better price than me, the retail trader.

Can anyone shed more light of this? Am I correct in assuming that there are traders who can circumvent the $0.005 increment rule? If so, who are they? And better still, how do I become one?

 

[lasty]

I am referring to retail vs institutional traders of course. Some examples include commissions, inside info etc.

One thing I noticed recently was that of option prices. I had some WOTM Woolworths (WOW) puts recently which I was trying to close. Fair value was approximately $0.007. As a retail trader, I could submit a sell order for either $0.005 or $0.010 as the order price increments were limited to $0.005.

On the next morning, I noticed the the previous close of the WOW put was $0.008. This meant that some trader was able to circumvent this $0.005 increment limitation. This also meant that retail traders who can't circumvent this limit are disadvantaged. Eg. I am only able to sell for $0.005 if I chose to close, but the successful trader obtained $0.008 ... a 60% better price than me, the retail trader.

Can anyone shed more light of this? Am I correct in assuming that there are traders who can circumvent the $0.005 increment rule? If so, who are they? And better still, how do I become one?

You are a retail punter.
You will pay more than a wholesale punter.
You will get less information.

It rings bells across all markets.

So here lies the lesson when first learning/starting out.
Before getting suckered into a course ask the people running it how much experience they have had,whether they have worked in the industry before and for how long (GET REFERENCES) or a merely an IT dude selling DVD training software.

People who have worked in the industry know the connections, will show you the pitfalls and perhaps introduce to some professionals.
A couple of my mates are about to start a FX training course.They have worked in FX for 40 years between them at big institutions.
These guys know the ins and outs, the contacts, the best platforms, the information.
They arent just product sellers.

 

[sails]

I am referring to retail vs institutional traders of course. Some examples include commissions, inside info etc.

One thing I noticed recently was that of option prices. I had some WOTM Woolworths (WOW) puts recently which I was trying to close. Fair value was approximately $0.007. As a retail trader, I could submit a sell order for either $0.005 or $0.010 as the order price increments were limited to $0.005.

On the next morning, I noticed the the previous close of the WOW put was $0.008. This meant that some trader was able to circumvent this $0.005 increment limitation. This also meant that retail traders who can't circumvent this limit are disadvantaged. Eg. I am only able to sell for $0.005 if I chose to close, but the successful trader obtained $0.008 ... a 60% better price than me, the retail trader.

Can anyone shed more light of this? Am I correct in assuming that there are traders who can circumvent the $0.005 increment rule? If so, who are they? And better still, how do I become one?

Fox, it is possible that it varies depending on the broker. I have understood that options under 1c are tradeable at .1c increments, and then go to .5c increments from 1c up.

 

[cutz]

Hi Fox,

Depending on your platform the last price may actually be the previous settlement price if no trades were done.

 

[Fox]

Fox, it is possible that it varies depending on the broker. I have understood that options under 1c are tradeable at .1c increments, and then go to .5c increments from 1c up.

I am pretty certain etrade and IB do not allow 0.1c increments. I have yet to try 0.1c increments with CommSec. Does anyone know of any Aussie broker offering 0.1c increments?