I recently just received a question from a member about trading options with Limit orders. I thought these were good questions so I thought of writing a blog entry to share the answers with everyone.
In the example, the member picked DJWQU, a PUT option on the 1/100 Dow Jones Index (Symbol: DJX) with 125 strike and expiring on May 17. The 1/100 means that the strike prices are 1/100 of the actual DJIA, so in this case, the 125 strike actually refers to 12,500 points on the DJIA. Since the DJWQU is a PUT option, the option will become In-the-money (ITM) when the DJIA goes under 12,500.
At this time, the DJWQU option is reporting a Last price of $0.14, and a Bid/Ask of $0.16/$0.25 respectively. So if someone places a Limit order to buy contracts of DJWQU at $0.15 or less, will that order get filled right away?
Given the above situation, the short answer is NO ...
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