Anybody trading 100+ SPX options per order

Quote from opt789:

So to you three years of trading is experienced, and 100 contracts is serious size. I disagree on both counts, but I have answered the SPX fills question as best I could.
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Nope, but not a newbie :) and 100 contracts is not serious size. If I would trade a at least 1000 lots per side than we have serious size but that's work in progress :D I have seen successfull MM's going bankrupt because there "experience" said something would work (and losing millions) . I'm well aware that you should adopt to new market situations.

Thanks for your contribution you gave me inside in the SPX I normally wouldn't have. What´s the best way to place orders in SPX. as 2 leg spread, or 3 legs (or 4 leg with regard to Iron Conders). Are there circumstances that will give me a better executions because I can offer liquidity. Or perhaps time of day or particular days. Thanks
 
Quote from TYtrader:

Why don't you use a live broker? there are several very good firms that have people on the floor that will work these orders for you for a buck a contract.
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Which good brokers will give me access to the floor? I"m not familar with US brokers regarding Open Outcry
 
Quote from DutchMan:

What´s the best way to place orders in SPX. as 2 leg spread, or 3 legs (or 4 leg with regard to Iron Conders). Are there circumstances that will give me a better executions because I can offer liquidity. Or perhaps time of day or particular days. Thanks
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Again I can only answer based on my experience in T-bond options, but perhaps some of that is true on the CBOE floor as well.

You definitely want to put all legs into each spread order, and execute it as a single spread. You're giving up the edge with each order, so why would you want to do that more times than you have to?

What time of day is best? Not first thing at the opening - it's too busy. Not last thing near the close - also too busy. Not in the middle of the day - pit's half empty. So I would guess sometime in the morning after the initial rush has cooled, or sometime in the afternoon before the closing chaos has begun.

You could experiment with these - although from listening to opt789 it doesn't sound as if it will make all that much difference in that pit.
 
Without having someone on the floor, you can't really tell what the conditions are. Things change all the time, the floor could be long more than they want one day, and a few days later everything has changed. As a retail trader without direct knowledge the best you can do is know what fair value is for your order and try to get as good a fill as possible. Compare the SPX quotes you get to the equivalent ES trade and see how they look. If the VIX spikes then you know the floor doesn't want to sell much, and if it drops quickly they don't want to buy much. Honestly I don't think any of this will make much difference to you. The spreads you sell for a little money will either expire worthless and you are right or they can gap against you and you have a max loss. Whether or not you got another .10 for the trade won't change that. As has already been mentioned, a delta neutral order is easier to work. DMO gave you some good advice.

For calling and getting quotes you can try ThinkorSwim and InteractiveBrokers. I think you have to do at least 100 contract to get IB to give you a quote. Keep in mind that you are a small player so no one really cares about your order and no broker is going to go out of his way to spend time working it. I have done orders of over 10k contracts and spoke with the LMM (main market maker) and they still tried to give me bad prices.
 
Somebody mentioned that they could use somebody's opinion from the CBOE floor...I am on the CBOE floor only as a clerk but I could tell you this:

1) the market makers in the SPX make their money by standing next to the brokers who get the paper from the big NY institutions. It is not uncommon for a SPX market maker to be a few thousand up on a front month line. If you come in with 100 or 200 contracts it is very possible that they won't touch it because they could care less. If you were trading <100, I would say don't bother. They might care for a 100, I am not sure.

2) you asked about the OEX pit. I wouldn't go near it the OEX is a good product but the volume on it is dead, there used to be over 500 people in that pit and today there are about 30-40. There's just not much point in it.

The NDX, DJX, and RUT used to be be products too and they are all electronic now, and most of them not good especially DJX, RUT to a lesser degree. NDX is okay like somebody said, if ISE trades it that is a plus.

Are you paying your broker per contract? if you can get around that, perhaps give him a call and negotiate, I would definitely advise trading SPY & IWM as the liquidity is phenomenal and they support electronic trading fully. Those products are not traded exclusively on the CBOE, causing more competition, specifically the ISE who is launching a major campaign to blow past CBOE. I know the DPMs for both products IWM & SPY and they do a good job. You could also trade VIX options there is lots of depth in that market. They have a top notch DPM and a very active pit both electronically and open outcry.

SPX you could try, I know some of the people on the index committee of the CBOE, a lot of them think the SPX will become entirely electronic too, and that that change will be for the better. Apparently for a long time the SPX market makers have had the political pull at the CBOE, but that is changing.

The Qs pit used to be just like the SPX, the place to be. These days the Qs trade more options than ever and there are about 4 traders in that pit it is all done upstairs.

Hope this helps.

-Sean
 
Great information Dr Sean, thanks. I think the SPY is a good idea for the Dutchman. Great liquidity, penny spreads in many options, and you get to sit in front of your screen and see exactly what you're doing and not have to deal with those scumbags on the floor.

With an IB or TOS platform you can put your orders in as a spread and see EXACTLY what the real market is and adjust as necessary. That sounds way preferable to being separated from the action by having to go through a phone clerk.

With an IB platform you can also see those same spreads in the ES and compare (not sure if you can it with TOS). I think you can also put out electronic RFQ's (requests for quote) and see if anyone out there in electronic-land wants to take the other side of your spread at a better price than the synthetic quotes you get.

And in a fast market you won't have to wait in vain for someone to pick up the phone.
 
SPY would definitely be better, but if the question is about 100 lots of SPX, you're now dealing with 1000 lots and its part of spreads, which doubles it at least, and then you have the fact that SPY settles American and SPX European.
 
Quote from dmo:

Your order will probably be filled fairly given what's going on in the pit at that moment. The problem is that you're far removed from that action (compared to the electronic), so you don't have direct contact.

The way around that of course is to put in limit orders. To me, the advantage of trading options with the pit is that you can negotiate with the guys in there, something you can't do on the electronic.

Orders I put into the pit are always delta and gamma-neutral spreads - usually 3-way spreads with two option legs, delta-neutral against the underlying. The MM's love those orders because they want to be flat too, so for them it's one-stop shopping with no execution risk.

So you can put in a bid, get an offer, then actually carry on a dialogue with the MM's through your desk, negotiating a price. There's actually some psychology here - during this process more and more MM's get interested, then get afraid of missing out, and you'll end up getting a better price.

So drag the process out over several minutes, give the guys a chance to drool a little, so that they're ready to jump when you go up the next tick. Each time you go up a tick, you'll draw more MM's in, who are now starting to worry they'll miss out and that the guy next to them will beat them to it (yell "sold" first) when you go up a tick more. Go up a tick, say, every minute or two. That will get the sharks circling.

My experience is in futures option pits, not the SPX. But I'm sure the psychology is the same.
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No that is not how it works, just because MM X,Y and Z bought so and so for 4, and it is still offered, does not mean we will pay 5 for it. It all depends on or position, sometimes 3 and 4 leg orders will trade even just to limit our strike risk, but as you stated above, it is not like that at all.

As far as getting the sharks circling with every up tick, what if the trade is a call tree and with every up tick the value of the spread goes up, meaning our edge goes down and we won't make money. It sounds like you don't know that the value of an option correlates with the underlying. Please tell me you know put-call parity.
 
Quote from TYtrader:

SPY would definitely be better, but if the question is about 100 lots of SPX, you're now dealing with 1000 lots and its part of spreads, which doubles it at least, and then you have the fact that SPY settles American and SPX European.
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There is definitely the depth in SPY to trade 1000+ contracts like I said the SPX has depth to trade 1000+ contracts in bigger $$$ terms. The only issue you might have is if you're commish is quotes on a per contract basis and like I said call up your broker they will negotiate if you're going to be doing 100+ contracts; a lot of them know they can't support the open outcry products like SPX so they'll encourage you to do something electronic--I have TOS this is definitely true w/ them.

Regarding exercise, he asked about OEX is american so I was assuming he'd be okay w/ American. SPY also has a dividend you have to be aware of. Still, I'd say go w/ it! Or VIX like I said! (which is European btw)
 
Quote from dr_sean:

Somebody mentioned that they could use somebody's opinion from the CBOE floor...I am on the CBOE floor only as a clerk but I could tell you this:

1) the market makers in the SPX make their money by standing next to the brokers who get the paper from the big NY institutions. It is not uncommon for a SPX market maker to be a few thousand up on a front month line. If you come in with 100 or 200 contracts it is very possible that they won't touch it because they could care less. If you were trading <100, I would say don't bother. They might care for a 100, I am not sure.

2) you asked about the OEX pit. I wouldn't go near it the OEX is a good product but the volume on it is dead, there used to be over 500 people in that pit and today there are about 30-40. There's just not much point in it.

The NDX, DJX, and RUT used to be be products too and they are all electronic now, and most of them not good especially DJX, RUT to a lesser degree. NDX is okay like somebody said, if ISE trades it that is a plus.

Are you paying your broker per contract? if you can get around that, perhaps give him a call and negotiate, I would definitely advise trading SPY & IWM as the liquidity is phenomenal and they support electronic trading fully. Those products are not traded exclusively on the CBOE, causing more competition, specifically the ISE who is launching a major campaign to blow past CBOE. I know the DPMs for both products IWM & SPY and they do a good job. You could also trade VIX options there is lots of depth in that market. They have a top notch DPM and a very active pit both electronically and open outcry.

SPX you could try, I know some of the people on the index committee of the CBOE, a lot of them think the SPX will become entirely electronic too, and that that change will be for the better. Apparently for a long time the SPX market makers have had the political pull at the CBOE, but that is changing.

The Qs pit used to be just like the SPX, the place to be. These days the Qs trade more options than ever and there are about 4 traders in that pit it is all done upstairs.

Hope this helps.

-Sean
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Thanks for your information regarding SPX and other index options! Why is RUT not a good product to trade? It’s listed on more than 5 exchanges (incl. ISE) and the volume is getting better and better. I also looked at NDX but the volume and Open Interest is lower but don’t have your experience.

I find the SPY and IWM not interesting to trade because I have to trade 10 times the size so trading costs will increase. The spreads are lower but because I have to increase my position 10 times it doesn’t really makes a difference.

Any idea when SPX could goes electronic? Do you know what is interesting. In Europe all index options are single listed but the spreads are much lower compared with the US. The DJ EuroStoxx50 and DAX are the biggest products in Europe and it’s more than normal to get executed at midpoint or around midpoint (max. 5 cents from midpoint). It doesn’t matter if you trading outright, 2 leg or 3 leg spreads. Currently trading around 50 / 100 per leg and getting executed around midpoint is easy in Europe, you don’t even need to work your order. Competition between Market Makers is huge.
 
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