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Ask Alan – Low Open Interest & Large Bid Ask Spread

Alan answers a question coming from 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?

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Posted on August 29, 2012 by in Ask Alan

About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.
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7 Responses to “Ask Alan – Low Open Interest & Large Bid Ask Spread”

  1. Amy August 29, 2012 6:36 pm
    #

    cute ending!

  2. Greg August 30, 2012 1:29 pm
    #

    Alan,

    Which sites do you use to get option chain quotes?

    Thanks.

    Greg

  3. Alan Ellman August 30, 2012 4:11 pm
    #

    Premium members:

    This week’s 6-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site.

    For your convenience, here is the link to login to the premium site:

    http://www.thebluecollarinvestor.com/member/login.php

    NOT A PREMIUM MEMBER? Check out this link:

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    Alan and the BCI team

    ***ALL MEMBERS ATTENDING MY LAS VEGAS SEMINAR ON SEPTEMBER 14th PLEASE INTRODUCE YOURSELF TO ME BEFORE OR AFTER MY PRESENTATION. I’D LOVE TO MEET YOU IN PERSON. REGISTER FOR FREE ON THIS SITE.

  4. Dave D August 31, 2012 1:51 am
    #

    Hey Alan and friends

    Is there any good websites that are good for stock analysis that are similar to say ‘IBD’ and there stock ratings?

    Thank you

    Dave

    • Alan Ellman August 31, 2012 4:22 am
      #

      Dave,

      The IBD screens used in the BCI methodology are unique proprietary screens that are especially useful for 1-month covered call writing. We use these in conjunction with the MSN Scouter screen, technical analysis and the common sense screens described in my books and DVDs. There are many other GENERAL stock screens that you can adjust to your needs and goals available, some of which are located on free sites. Here are a few:

      http://www.finfiz.com

      http://www.cnbc.com/id/15839076/

      http://www.screener.finance.yahoo.com/stocks.html

      Alan

  5. Alan Ellman August 31, 2012 10:54 am
    #

    Rebroadcast of radio interview on Friday 8-31-12:

    http://www.TheBusinessAuthorsShow.com.