Trade Options with an Edge by Russell Richards

Author:Russell Richards [Richards, Russell]
Language: eng
Format: epub
ISBN: 9781524538170
Publisher: Xlibris US
Published: 2017-01-22T21:00:00+00:00

The Final Step: Submit the Order, Confirm, and Send

You are now ready to submit the order. Go ahead, you can’t make money without submitting the order. When you create the order, most brokerage firms will ask you to confirm the order. The brokerage firm will show you the underlying, the number of contracts, the options involved (the expiration(s), and the strikes)—an indication whether each option is being bought or sold—the price, and the duration. In addition, my brokerage firm provides the breakeven values, the max profit, the max loss, the cost of the trade (including commissions) and the buying power effect.

Review all of this carefully. If you submit an erroneous order and it has not executed, you will be able to cancel it. However, if it has executed, you will probably have to live with it. Your brokerage firm will likely not be able to help you. I have made several errors in order placement and all could have been prevented if I had carefully checked the confirm information. My most common mistakes have been to forget to change the default number of contracts to the level that I want, and to place buy orders when I want to sell or to place sell orders when I want to buy. When I realize my error and it is too late to cancel the order, I either unwind the order (place the opposite order) to get out of the position or I live with it. If I unwind the position, and then place the order I really wanted, I have to pay 3 sets of commissions instead of 1. In addition to paying the extra commissions, during the time required to unwind the trade, price changes in the underlying may result in losses in the positions. Thus, errors can be expensive.

When you are confident the order is correct, hit the Send key. The trade is now active. Your brokerage firm will indicate when a working trade has been filled, and it will provide the details of the fill. You are now “on the board.”

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