Trading Options with Low Open Interest and Large Spreads

09/07/2012 6:00 am EST

Focus: OPTIONS

Alan Ellman

President, The Blue Collar Investor Corp.

Alan Ellman, a featured speaker at the upcoming Forex & Options Expo, answers a question coming from option trader Karen of Marietta, GA.

Karen writes: "I recently purchased LivePerson, ticker symbol LPSN for $17.49. The $15 strike has a low open interest of 32 and a large, bid ask spread of $0.45. The $17.50 strike has a much larger open interest of $300 and a smaller bid ask spread of $0.30. My question is… Should the low open interest and large bid ask spread deter me from using the $15 strike?”

Alan answers this trader’s question in the video below:

Alan Ellman can be found at TheBlueCollarInvestor.com.

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