Beating the Spread

Quote from invaliduser:


If you split the spread, say its .90 and 1.00, and go in at .95 most times you will be matched by the mm and being 1st in line is worthless. Sometimes you will get filled so they can maintain the spread. But beating the spread just does not happen for me.
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My experience too. Even worse, they only fill half of your order and leave you sitting with the other half while prices move away. If you need the fill (for hedging or so) you have the dilemma of canceling and putting on a new order for the rest; this is extra costs when you pay a fixed-fee, as I do, and also causes less optimal or even missed opportunities.

A possible remedy is to always trade in spreads; this way you can enter a fair-value, which is more often acknowledged by the market in my experience.

Ursa..
 
Quote from MajorUrsa:

My experience too. Even worse, they only fill half of your order and leave you sitting with the other half while prices move away. If you need the fill (for hedging or so) you have the dilemma of canceling and putting on a new order for the rest; this is extra costs when you pay a fixed-fee, as I do, and also causes less optimal or even missed opportunities.

A possible remedy is to always trade in spreads; this way you can enter a fair-value, which is more often acknowledged by the market in my experience.

Ursa..
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I guess I should also mention that my experience with getting good fills is with less than 10 contracts, and usually less than 5. I might not do so well on more...

Good luck to all.

C
 
I certainly got beat by the MM's on ER2 futuresoption today. how can they have a friggin spread of 4 bucks that is an out right robbery.
 
I used to play this game (sitting on bids and offers) in the DIA-options a few years ago, was quite profitable, but when IB started asking cancellations costs this was all over. You had to be very patient (i did something like 10-15 trades each day, trading between 150-200 options) and I was making a price in 20-30 strikes. I have to admit to do this properly you have to adjust your prices constantly (somedays I used to send about 1000 quotes to the exchange). I hedged my delta almost always immediately in the DIA or YM. You had to be carefull though that the mm didn't start to adjust volatility too fast, otherwise your theoretical edge blew up in your face. It was fun while it lasted. I lost money on average only about once each month, broke even on two days and made money on all the other days. I got the feeling however spreads have come down and that a lot of executions nowadays take place between spreads at theoretical prices.
 
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