Best Algo For Filling Options Orders

[ajacobson]

Size of 50 or more. Any broker who routes the big three can do it if they want. IB could do it if they wanted. Probably needs to be a phone order which is a reason for a firm to avoid them.
I can do it at 5 brokerages houses and I worked at OptionsXpress and Schwab after they bought oX and both could do it as a phone order. oX also didn't up-charge for phone orders. Half your research could be finding the right person to talk to. DM me and I'll give the guy who runs options trading at Schwab. A good firm may tell you just to leave the order with desk and let them work it - which isn't a bad idea - read up on preferenced orders and you'll you'll begin to get a sense of what could be dark on the exchanges and most houses get that data feed. SPY - which is very liquid - usually has a 250,000 contracts dark, front month and a few strikes either side of ATM, but SPY is the easy one. Once you go outside of the top 15 - 20 names ISOs are pure gold. Again multi list only. There is a rep. from Lightspeed is on the forum and he's a former AMEX MM in APPL - you might want to reach out to him. He is very knowledgeable. In my view anyone who tells you that it can't be done or it's for institutions only is full of shit and lazy.
The big three for routing are Citadel, SIG and Wolverine although third place flips a lot. Most days they are about half the MM activity.
The order type is legal on every venue.
I just opened Pandora's box.
I'm going to open a bottle of Templeton and blame on the booze.

Good luck trading,
https://www.google.com/url?sa=t&rct...usg=AOvVaw3FJ_-bXW2VU2yuuDVgIlDW&opi=89978449

 

[Robert Morse]

I did not jump in before as he was looking for an Option Algo to use on the IB API. He said he was looking to use their Option Algo with Market Orders on the Urgent setting. I do not know at IB how that execution would be any different than sending a market order to one of our SMART routes. When I say SMART, they are not. They are directed to a DMM for execution. The advantage is you bypass Option exchange maker/taker fees on all but cash settled indexes. You still get very fast executions. With their ALGO and that settling, it will get very expensive. Buying on the ASK and Selling on the BID on every order is bad enough, but always paying to remove liquidity is a large added cost. Between the spreads and exchange fees, you better be very right very often. If it were me, I would use my API to work the orders to find liquidity to get in and out. You might miss a few opportunities on the way in and missing exiting at optimal prices a few times, but in my opinion if you work the orders vs being that aggressive 1000 times, you end up better not paying the spread every time and you have an opportunity to get paid by adding (For an automated option trader, at Lightspeed, you can do this on Sterling Trader Pro, EZE EMS or CBOE SILEXX). If you work a large number of option orders, you have to be careful not to exceed 390/Day orders on average over any month to avoid much higher fees.

There is a rep. from Lightspeed is on the forum and he's a former AMEX MM in APPL - you might want to reach out to him. He is very knowledgeable.

 

[Robert Morse]

This is not something you need to be concerned with. Option markets are not allowed to lock quotes. The default is if you send an order to one option exchange and there is no liquidity at that price, is to re-route that order to another exchange that does. This can get very expensive. Many option exchanges charge a fee to route out the order and the one with posted orders often charges to remove those orders.

While I won't ask for a brokerage relationship, do you know of any brokers that do offer ISOs for options?

 

[optionstrader2022]

Size of 50 or more. Any broker who routes the big three can do it if they want. IB could do it if they wanted. Probably needs to be a phone order which is a reason for a firm to avoid them.
I can do it at 5 brokerages houses and I worked at OptionsXpress and Schwab after they bought oX and both could do it as a phone order. oX also didn't up-charge for phone orders. Half your research could be finding the right person to talk to. DM me and I'll give the guy who runs options trading at Schwab. A good firm may tell you just to leave the order with desk and let them work it - which isn't a bad idea - read up on preferenced orders and you'll you'll begin to get a sense of what could be dark on the exchanges and most houses get that data feed. SPY - which is very liquid - usually has a 250,000 contracts dark, front month and a few strikes either side of ATM, but SPY is the easy one. Once you go outside of the top 15 - 20 names ISOs are pure gold. Again multi list only. There is a rep. from Lightspeed is on the forum and he's a former AMEX MM in APPL - you might want to reach out to him. He is very knowledgeable. In my view anyone who tells you that it can't be done or it's for institutions only is full of shit and lazy.
The big three for routing are Citadel, SIG and Wolverine although third place flips a lot. Most days they are about half the MM activity.
The order type is legal on every venue.
I just opened Pandora's box.
I'm going to open a bottle of Templeton and blame on the booze.

Good luck trading,

Thank you! I will DM you as soon as EliteTrader allows me to. I don't think I unlocked that feature yet because my account is so new.

 

[optionstrader2022]

I did not jump in before as he was looking for an Option Algo to use on the IB API. He said he was looking to use their Option Algo with Market Orders on the Urgent setting. I do not know at IB how that execution would be any different than sending a market order to one of our SMART routes. When I say SMART, they are not. They are directed to a DMM for execution. The advantage is you bypass Option exchange maker/taker fees on all but cash settled indexes. You still get very fast executions. With their ALGO and that settling, it will get very expensive. Buying on the ASK and Selling on the BID on every order is bad enough, but always paying to remove liquidity is a large added cost. Between the spreads and exchange fees, you better be very right very often. If it were me, I would use my API to work the orders to find liquidity to get in and out. You might miss a few opportunities on the way in and missing exiting at optimal prices a few times, but in my opinion if you work the orders vs being that aggressive 1000 times, you end up better not paying the spread every time and you have an opportunity to get paid by adding (For an automated option trader, at Lightspeed, you can do this on Sterling Trader Pro, EZE EMS or CBOE SILEXX). If you work a large number of option orders, you have to be careful not to exceed 390/Day orders on average over any month to avoid much higher fees.

Very very interesting.... thank you!