An order to buy or sell at a specified price or better. The standard order type for options — ensures you control execution price at the cost of potentially not filling.
⚡ KEY TAKEAWAY: Start at mid price. If no fill in 30 seconds, adjust $0.01-0.02 toward the natural side. Patience beats market orders.
Why It Matters
Limit orders are the only order type premium sellers should use. They give you control over execution price and prevent the slippage that market orders cause on wide-spread options.
How It Works
Set a price and wait. A limit buy only fills at your price or lower. A limit sell only fills at your price or higher. The order rests in the book until filled, canceled, or expired.
Example
Selling a SPY put: bid $2.80, ask $2.90, mid $2.85. Set limit sell at $2.85. If no fill in 30 seconds, adjust to $2.83, then $2.81. This ladder approach gets better prices than market orders.
Common Mistakes
Setting limits too aggressively and never filling. If you always try to sell at the ask, you'll miss trades. Start at mid and move toward the natural side in small increments.
An order to buy or sell at a specified price or better. The standard order type for options — ensures you control execution price at the cost of potentially not filling.
Why does Limit Order matter for premium sellers?
Start at mid price. If no fill in 30 seconds, adjust $0.01-0.02 toward the natural side. Patience beats market orders.
How does Limit Order work?
Set a price and wait. A limit buy only fills at your price or lower. A limit sell only fills at your price or higher. The order rests in the book until filled, canceled, or expired.
What are common mistakes with Limit Order?
Setting limits too aggressively and never filling. If you always try to sell at the ask, you'll miss trades. Start at mid and move toward the natural side in small increments.
