BIG IDEA: INDICES OFTEN HAVE WIDER BID/ASK SPREADS. SO YOU’LL HAVE
TO THINK ABOUT TRADING THEM DIFFERENTLY. HERE’S HOW TO USE
PRICE DISCOVERY TO FIND WHERE TRADERS ARE TRADING AN INDEX.
THEN USE THAT INFO TO PLACE YOUR ORDERS.
Index options on the SPX, RUT, and NDX are the granddaddies of the
option world. They’re high-priced, actively traded, and attract some
of the biggest professional traders. You trade these options, and you’re
playing in the big leagues. And they’re also a place where you can learn
valuable lessons about trading mechanics and reducing slippage—
knowledge that applies to anything you trade. Trading index options
can be unforgiving. You learn from mistakes fast. The key to avoiding
these mistakes is to think about index option trades like a savvy trader.