Chapter 04 · Section 4.1
Limit Orders - price fluctuations
A floor broker received this limit order:
Buy 3 Puts Citicp July 55 at 6 3/8 or better
The put option trades at 6 1/4. However, the floor broker has received a hot tip and thinks the price may drop to 5 1/8 later in the day. Should the floor trader wait for the price to drop and buy the put options at a lower price?
a) no
b) yes
Remember the floor broker does not trade for himself, but for his customers.