Bid/Ask and guaranteed execution

M

marsman

Hi,
this is an options related question regarding order execution:
If a strike has an offer in the orderbook then on our screens the fields Bid or Ask, or both, are displayed with the offer prices.
If there is no offer in the orderbook then Bid/Ask are empty to indicate that.
Now, the question is: if there is an offer in the orderbook, can I get a guaranteed fill if my offer matches that in the book?
Normally I would expect that, and also common sense says so, but just just wanted to be sure.
Ie. whether a fill can fail?
 
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marsman said:
Hi,
this is an options related question regarding order execution:
If a strike has an offer in the orderbook then on our screens that Bid or Ask, or both, are displayed with the offer price.
If there is no offer in the orderbook then Bid/Ask are empty to indicate that.
Now, the question is: if there is an offer in the orderbook, can I get a fill to exactly the price in the book?
Normally I would expect that, and also common sense says so, but just just wanted to be sure.
For example such a quote. It's an ITM put, underlying Spot is $10.06:
View attachment 164761
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There is a lot of misused terminology in your post, so it's not clear what you are asking.

1. A strike price has nothing to do with bid/ask.
2. "Offer" is the term used to mean the same as the term "Ask", but you seem to assign different meaning to these two terms.
3. The phrase "Bid or Ask, or both, are displayed with the offer price" does not make any sense.
4. The phrase "can I get a fill to exactly the price in the book" does not make any sense, because there is no single "price", but rather best bid and best ask.

With the bid/ask as shown, you can buy immediately at $0.35, or sell immediately at $0.20. Alternatively, you can place a limit order, but the execution is not guaranteed.
 
nonlinear5 said:
With the bid/ask as shown, you can buy immediately at $0.35, or sell immediately at $0.20. Alternatively, you can place a limit order, but the execution is not guaranteed.
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When using limit order and if there is no change in Bid/Ask, can the execution of my order still can fail?

Why has a strike nothing to do with Bid/Ask? Sure does it, I would say.

PS: I edited the initial posting to fix some of the points you mention.

PS2: By "offer" I mean the Buy and Sell offers, ie. the Bid and Ask prices in the book, and also my own offer price to buy or sell.
 
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marsman said:
When using limit order and if there is no change in Bid/Ask, can the execution of my order still can fail?
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-- if the price of your buy limit order is at or above the best ask, you'll get an immediate execution
-- if the price of your sell limit order is at or below the best bid, you'll get an immediate execution
-- in all other cases involving limit order, it would be placed in a queue, and you'll have to wait until the market price moves and touches your limit order.
 
nonlinear5 said:
-- if the price of your buy limit order is at or above the best ask, you'll get an immediate execution
-- if the price of your sell limit order is at or below the best bid, you'll get an immediate execution
-- in all other cases involving limit order, it would be placed in a queue, and you'll have to wait until the market price moves and touches your limit order.
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That's also what I would expect. Thx for confirmation.

Then, hopefully in a few minutes I'll be able to present a very lucrative trade for analysis...
 
marsman said:
Why has a strike nothing to do with Bid/Ask? Sure does it, I would say.
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The strike price is fixed for the life of an option contract. The bid/ask prices continuously change.

marsman said:
Then, hopefully in a few minutes I'll be able to present a very lucrative trade for analysis...
More...

I look forward to it.
 
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nonlinear5 said:
I look forward to it.
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Ok, here's one from the NASDAQ site: Underlying=DUST Expiration=2016-06-24 Type=Put-Short Strike=20:
DUST_2016-06-24_K20.png

It's ITM, and current spot of underlying is $10.08.
But according to my calcs the PnL should be > +80% in just a week. Isn't it?

Update:
Hmm. it seems my program which did the calculation has a bug... Will recheck it...
 
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nonlinear5 said:
You've calculated the P&L on an unspecified trade. This makes no sense to me.
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Sorry, it was a completely buggy trade as the program had a bug.
I must say, today is not my day, I made too many errors, sorry.... :(

But now I quickly fixed it, and with a different strike of the same underlying it seems to find another good trade. This one:
Underlying=DUST Expiration=2016-06-24 Type=Call-Short Strike=11.50 Bid=0.40 Ask=0.55
Profit about 18% based on margin requirements of broker IB.
Of course would need to be hedged if necessary.
 
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