You\u2019ve often heard us talk about the important of trading liquid options until you are blue in the face right? In this session of The Option Alpha Podcast we\u2019ll put a real dollar figure to this concept and show just how much \u201cslippage\u201d is costing you trading options that are illiquid.
Specifically markets that show a bid/ask spread of just $0.20 could end up costing you more than $3,840 each year - and that\u2019s just the cost of getting into or out of the trade!
Throw in the risk that the stock doesn't move the way you want it and you can easily see why most traders dig themselves into a whole even before the trade has a chance to work for them.
Yet, often times we focus too much on our commission costs and rarely if ever do you \u201cfeel\u201d the pain that slippage costs your portfolio. It\u2019s time we start worrying less about commissions and more about slippage by focusing on only highly liquid options and underlying stocks.