By Joe Duarte

You need to know how to navigate the options market, starting with executing trades. Entering an order through the Internet on your broker’s system triggers an extremely fast series of events:

  • The order is routed to one of six exchanges where it gets executed if it satisfies the current market quote or is reflected in the market if it improves the accuracy of the current quote.

  • If your order is routed to an exchange with a less favorable market quote, that exchange can either improve its price or send it to the exchange with the best quote because the exchanges are linked electronically.

  • If and when your order is executed, a report is sent back to your broker with the trade details. This information appears almost immediately in your account when received by your broker.

  • Orders that improve the best market quote are posted quickly on the exchange where it was routed. The order is reflected across all exchanges as the best bid when buying or the best offer (ask) when selling. It remains there until it is executed or a better bid or offer replaces it.

So much of the order process is completed electronically that you can have an execution report in seconds — unless there is a problem, such as an electronic glitch or a problem with the liquidity of the option. Always check the trading volume of your underlying stock and its related options.

Generally, less liquid stocks and out‐of‐the‐money (OTM) options have less trading volume than in the money options and high‐volume stocks. And your order fill could be potentially slower, although this is a rare phenomenon.

If you are experiencing regular delays, you need to consider what role your Internet connection plays in that problem.