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The Complete Guide to Option Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets, 3rd Edition by Michael Gross, James Cordier

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11

Option-Selling Mechanics

Quick Tips on Liquidity, Timing, Order Placement, Assignment, Limit Moves, and More

Liquidity

The subject of option liquidity is one that produces varying opinions on what is right and what is wrong; what is safe and what is risky. Given the choice, any investor would prefer high liquidity. But one of your advantages as an individual investor is that there will be option premium for you to sell that may not be practical for a large institutional investor to trade. Whereas the large fund manager may need to trade several hundred or even thousands of options at a single strike price and therefore need very high liquidity, you may only need a few hundred contracts of open interest to sell enough options to satisfy your ...

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