What Is Market Order & Limit order...
Market Order: You buy or sell the options at the current market best price. Market maker will fill-in the best price for you, which is the current bid and ask price.
Limit Order: You select a price which you think is reasonable to pay for an options.
Placing a Market Order: You pay $1.65 to buy a call; you will receive $1.60 by selling a call. In a volatile market, options price are changing quickly, your market order will get filled immediately
Placing a Limit Order: The spread is small, $0.05, not much room for bargain, you have to follow the bid-ask price. What if you place an order beyond the bid-ask spread (either pay to low to buy an option or request too high to sell an option) your order will not get filled.
Placing a Market Order: To buy a call option, you need to pay $19.00 and you will receive $15.40 by selling a call. You placing yourself at the mercy of market maker.
Placing a Limit Order: You think $19.00 is too high, you only willing to pay $18.00 for this call, so you fill in your limit order at $18.00, your order may get filled. You save $1.00 by negotiating with the market maker.
Placing a Limit Order: The spread is small, $0.05, not much room for bargain, you have to follow the bid-ask price. What if you place an order beyond the bid-ask spread (either pay to low to buy an option or request too high to sell an option) your order will not get filled.
Placing a Market Order: To buy a call option, you need to pay $19.00 and you will receive $15.40 by selling a call. You placing yourself at the mercy of market maker.
Placing a Limit Order: You think $19.00 is too high, you only willing to pay $18.00 for this call, so you fill in your limit order at $18.00, your order may get filled. You save $1.00 by negotiating with the market maker.
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