that there are 20 contracts that someone is willing to buy on the bid at $1.00 and 1,060 contracts are offered to sell on the ask at $1.05 and you might even see that the underlying stock is starting to go down. Let's say you happen to have 20 contracts to sell.
If you really want to exit the position, then you want to jump out of the position before the bid-ask moves to 95-$1.00 or worse. So you quickly fill in your order ticket to dump the 20 contracts at $1.00 and it gets filled right away since you saw a commitment for 20 contracts at $1.00 in the paragraph above.
Then normally you will see that following your order execution, as in this example, the bid-ask will move to .95-$1.05 or even .95-$1.00. This information that ATP provides saved you $100.00. How is that, because had you not know the size of contracts offered on the bid-ask and you placed your order at the ask of $1.05, your order would not have gotten filled and then if you wanted to get out you would have to sell at the lower new bid of 95¢.
Since the information on ATP is streaming and not static until refreshed or delayed like it is with other broker sites, you can see what the trend is.
Let's take an example if you want to buy options. Let's say that an option has a bid-ask price of $1.00-$1.05 and the number of contracts on the bid-ask is 4,263-30 and you want to buy 20 contracts. You can quickly place the order on the ask and know it will probably get filled. If you try to get in cheap and place the order on the bid the option might move away from you. Especially if you are looking at buying into an option pick from one of the services. This happened all too often with picks from Optionmonster. Other subscribers would moan that they put in an order on the bid when the alert came out, but it moved too quickly and the next thing they knew the price was 10, 20, or 30 cents higher from the alert notification price. Then they were trying to figure if they should chase, not chase, or wait for a pullback that many times never came. Those that acted quickly, already had the 10-30% gain as a cushion. Not a bad return if you can get it especially when you are talking about it taking place in an hour or less.
Without having the information you might have that option move to $1.20 before you realized why and how. If you really want to get into that position then in this case you might have saved yourself $300.00 on getting the cheaper price as it moved so you have a greater potential for profit.
If it moved this quickly then you might be in a position to sell for a quick profit especially if the option jumps to $1.30 later in the day. You would make almost 24% return before the commissions and in this example $500.00 before paying Fidelity $46.00 in commissions on an investment of $2,100.00. Had the option moved too quickly you might have missed out on the opportunity or let's say you bought in at $1.20 and wanted to get out at $1.30 later that day, then you made $200.00, but still have to pay the same $46.00 in commissions for a net of $154.00 or 8% gross return. That commission in the example where you paid a higher entry price of $1.20 was 23% of your winnings.. This is one reason why we try to get the cheapest commission prices without sacrificing information access and order execution. continued