Ins and Outs of ABG

Above is a 1 minute chart of ABG this morning at the open courtesy of FreeStockCharts.com. ABG opened at $37.45. See the arrow in the little rectangle. That's the opening prices at 1 minute intervals.  Since the stock opened below the breakout line we bought into the stock at $37.45 on the open and were out of the stock less than a few moments later at the same price or better of $37.55. So about broke even or with a small loss or gain on the stock trade. This makes me realize that the best way to place these orders on open is to place them as a contingency order if XYZ stock sells at or above (below in case of going short) the breakout line price then purchase the stock or option. That way when the stocks are opening lower as they did this morning you don't even get in.  Live and learn.

 Now if we made this mistake and bought the option this morning we are out a bit more because of the spread between the bid and ask prices of options. When you buy an option you pay the Ask price which is higher than the Bid price which is the price you get when you sell it. On this April $40 Call the difference between bid and ask is 40cents. So in all likelihood you would be out 25 to 40 cents per contract depending on how speedy you were to get out. In this case 5 minutes later gave you a gain in the stock price of about a dime. So this is why we paper trade to find out some of these bugs. However by putting in the contingency orders from now on this will not happen because the buy will not trigger unless the stock is trading higher (or lower in case of going short) than the breakout price line.