Don't Throw Money Away

Below is a WMB Put contract I own. The “spread” between the bid-ask is wide--$2.10 and $5.60, a $350 price spread. If I were to sell the contract with a “market order,” I would receive $210.

But if I were to sell with a “limit order,” I could name my own price. This doesn't guarantee I will get the price I want, but it's better than taking the default market price.

I would set my limit price at $5.60, or $560 per contract and see if I could get a buyer at the “ask price”. Sometimes this works, sometime you have to settle for less.

*each contract represents 100 shares of a company, so there is a 100X multiplier to get at the $ exposure.

When you sell a contract and don’t receive maximum amount on the deal, the unobtained $ amount is called “slippage.”       

It is best to make slippage as small as possible to make compounding growth as large as possible; this is done through “limit orders.”