O,apter 6: Ratio Call Writing 171 
prices only, however, he should attempt to build some screens into his output to allow 
for the fact that last sale prices might not be indicative of the price at which the 
spread can be executed. One simple method for screening is to look only at relative­
ly liquid options - that is, those that have traded a substantial number of contracts 
during the previous trading day. If an option is experiencing a great deal of trading 
activity, there is a much better chance that the current quote is "tight," meaning that 
the bid and offering prices are quite close to the last sale price. 
In the early days of listed options, it was somewhat common practice to "leg" 
into a spread. That is, the strategist would place separate buy and sell orders for the 
two transactions comprising his spread. As the listed markets have developed, adding 
depth and liquidity, it is generally a poor idea to leg into a spread. If the floor broker 
handling the transaction knows the entire transaction, he has a much better chance 
of "splitting a quote," buying on the bid, or selling on the offering. Splitting a quote 
merely means executing at a price that is between the current bid and asked prices. 
For example, if the bid is 37/s and the offering is 41/s, a transaction at a price of 4 
would be "splitting the quote." 
The public customer must be aware that spread transactions may involve sub­
stantially higher commission costs, because there are twice as many calls involved in 
any one transaction. Some brokers offer slightly lower rates for spread transactions, 
but these are not nearly as low as spreads in commodity trading, for example.