You don’t have to pay the mid-price to get filled.
This morning, I closed out the Meta calls I sold last week for $3.95. The market on them was 59 cents bid, 67 cents offered.
Most traders would just pay 67. The smarter ones would pay the middle, 63. I did neither.
I put in a bid at 61, and the market maker moved his bid up to meet me. Somebody else bid 64. So I canceled and replaced my order right at their 64 bid.
I got filled, right on the bid.
What I’m doing there is shadowing the market maker. Traders call it carping the bid. I match the best bid out there, and when a seller comes in, I get the fill, because public customer orders sitting in the book get priority over the trading crowd at the same price on exchanges like the Cboe.
So I sold those calls at $3.95 and bought them back at 64 cents. That’s $331 a contract in my pocket, and I didn’t give the market maker an extra penny to get out.
Is it going to work every time? No. In a fast market, you may have to chase or just sit it out.
But on a quiet contract like this one, patience and a limit order will save you money on every single trade, and over a year that adds up to real money.
I do this live, with real orders, in the TheoTrade chat room. Come watch the next one fill.
To your success,
Don Kaufman
