My question relates to the bid/ask price when trading index options on the XJO. On the 1/7/09, I decided to trade an intraday put option as there had been a big downfall on the DJI and FTSE overnight, hence, the XJO usually follows in the direction of these indexes. I entered a first in the money put option with open interest of 4000 at approximately 10:05AM. After I entered, the index kept falling in the direction predicted, but the bid/ask price did not change from when I first entered the option. I am under the presumption that the bid/ask price must move in your favour if the index moves in the direction predicted? As you can see, it was a massive move on that day but I still came out a loser as the bid/ask price barely increased, despite getting in early before the large move was made. In fact, the bid/ask moved against me despite guessing correctly.
The bid/ask seems to move downwards MUCH quicker when the direction of the index moves against me and its hard to make a profit. On the other hand, when the index moves in the direction predicted it moves barely or slightly. In terms of accuracy, I nearly have a 100% success rate in anticipating which way the index will move, but the bid/ask price does not reflect the direction of the movement, and hence, I am losing money despite my high accuracy rate. It seems to be rigged. Can anyone help?