How to Pick the Right Put Option
Michael Shulman, September 30, 2009
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Liquidity
Liquidity is an issue for small- and mid-cap stocks.
When I plan on buying a put, I like to see at least 5,000 open put contracts on a company, with at least 1,000-2,000 in the target expiration month and 500-1,000 for a specific contract.
The less liquid the put, the larger the spreads, and the less room for error when buying or selling the puts. And if you subscribe to a trading service, remember that others are trying to get into the same trade at the same time.
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