Are multi-leg neutral orders easier to get filled at price price?

[iprome]

On one hand, I’ve learned that market makers are usually more willing to fill delta-neutral orders (near “fair” prices), as delta-neutral trades require them little effort of delta-hedging their portfolio through, for example, adjusting their stock inventory.

On the other hand, delta-neutral orders usually comprise of multiple legs, and the more legs in your order, the less likely to have other retail customers as your counter party; this leaves marker makers the only party to fill your three- or four-leg orders.

My questions:

1. The two statements above are seemingly contradictive, or have contradictive implications. Which one(s) is correct? Does the instrument being listed on single or multiple exchanges play any role here?

2. If both are correct, is it reasonable to expect the following ranking on the likelihood of being filled near the “fair” price?

straddles = strangles >= condors = butterflies > verticals > individual legs

Thanks!

 

[iprome]

sry, noneditable typo in the title: "price price" -> "fair price".

 

[Robert Morse]

On one hand, I’ve learned that market makers are usually more willing to fill delta-neutral orders (near “fair” prices), as delta-neutral trades require them little effort of delta-hedging their portfolio through, for example, adjusting their stock inventory.

On the other hand, delta-neutral orders usually comprise of multiple legs, and the more legs in your order, the less likely to have other retail customers as your counter party; this leaves marker makers the only party to fill your three- or four-leg orders.

My questions:

1. The two statements above are seemingly contradictive, or have contradictive implications. Which one(s) is correct? Does the instrument being listed on single or multiple exchanges play any role here?

2. If both are correct, is it reasonable to expect the following ranking on the likelihood of being filled near the “fair” price?

straddles = strangles >= condors = butterflies > verticals > individual legs

Thanks!

I’m in x-market maker. this question is not possible to answer in a meaningful way that you’ll get anything out of it. Every situation is different, or you should enter the orders that work for you with the prices that work for you. Market maker is looking for an edge to his values not the midpoint.

 

[spindr0]

In my experience, orders with two legs tend to get better price improvement fills than anything with more legs.

 

[Roderick]

With market makers it's much easier in that way of course. I read a lot about it at one time.