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What do you all find is the best time to place orders on short options - the night before so it might get filled overnight or place them during the day session? What do you feel are the pro's and cons of each approach?
Too risky to leave orders up overnight. Something might happen to significantly alter prices against you.
ES future prices seem to bottom around 9:30 am ET. Not all days but more often than not.
I do try to trade on Thursday morning to beat price drop of weekend time erosion. It seems like option prices start dropping Thu afternoon anticipating the weekend time erosion.
It depends. If I see an opportunity to trade something, or want/need to close a position, I'll try to do so asap, regardless of the time of day. Most options' activity are during normal market hours, and this added liquidity may tighten the bid/ask spreads which benefits anyone placing market orders...but market orders are not recommend for most option trades. No harm at all in placing order "the night before"...if it doesn't get filled at a price you like overnight, it will still be working to get filled the next day. Then just re-send the order when it expires. Or you could send a G2C (good until closed) order, but I don't only because I worry I may forget about it.
That's the day traders approach, and makes sense if that is your style. But if you already leave open positions overnight, the same argument could apply to them....I don't see how those would be any less vulnerable to significant market moves than your working orders. I have very loud and long alerts go off if I need to get out of a position... because a short "beep" may not wake me up at 3AM. I have the same alert for when positions are filled. Fortunately the girlfriend is very understanding and the middle of the night ones don't happen too often for me.
Even if I place GTC orders and keep them for several days on rare occasions most of them are filled during the active trading hours. The reason is that for some commodities, eg. energies, the bid / ask spread during overnight hours is extremely wide.
This is the reason why I usually do not place orders for the overnight session. If you get filled in spite of the very large bid / ask spreads, you often would have gotten a better fill after the open.
Thanks guys for weighing in on this. For a while I was placing orders overnight so I could be first in line for a fill. However, there have been too many times when I woke up in the morning to find I'd been filled but was now at a loss because the market had moved against my strike over night.
