Bid price strategy for buying illiquid options with wide spread

J

john7722

Hello, How do you guys bid on options with a wide spread that have low to no volume.
I would like to buy for example LOGI jan 19' 24 call 95 strike
Spread is 12.30/16.60 no volume

Do you just place 12.30 bid and then wait Xmin ,,,then keep increasing the price every X min until you get to a mid price let say ?

And other question is ,how can you tell if you are getting a fair price if you are the only person who is bidding ? I always feel like I would be overpaying so I 've been avoiding such options.

Thank you .
 
Put the model column in IB TWS option trader by right clicking on column headers and adding. Then move your bid towards the model price.
 
ktm said:
The other thing I do is move the price until I'm alone on that side. That tells me the price is somewhat marketable because the MM (algorithm) didn't come with me.
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yes, sometimes you can place an order inside the quote and the spread will get tighter and besting your order. cxl replace your order and become best for N time limit
 
john7722 said:
Hello, How do you guys bid on options with a wide spread that have low to no volume.
I would like to buy for example LOGI jan 19' 24 call 95 strike
Spread is 12.30/16.60 no volume

Do you just place 12.30 bid and then wait Xmin ,,,then keep increasing the price every X min until you get to a mid price let say ?

And other question is ,how can you tell if you are getting a fair price if you are the only person who is bidding ? I always feel like I would be overpaying so I 've been avoiding such options.

Thank you .
More...


  • It depends on how you feel about the underlying.
  • Buying at the Ask is a bargain if you think LOGI will be trading above $115+ by the time the options expire.
  • Buying at the Bid is a bad deal if you think LOGI will be trading below $107 by the time the options expire.

Don't get too concerned about the bid/ask spread. Especially on a long position.
 
Interesting subject. deserves to be better developed.
I am interested in this type of approach. I tested it several times and several options possible but it did not work.
Orders already executed give late information but I believe they give more relevant information than limit orders. Taking an interest in the footprint can improve your approach.

Not so long ago I was made to understand that the price of futures can move without orders being executed. This may be the reason
 
ktm said:
The other thing I do is move the price until I'm alone on that side. That tells me the price is somewhat marketable because the MM (algorithm) didn't come with me.
More...
This is exactly what you would do if you wanted to match with a non MM counterparty. Alternately, if you want to get the transaction done at the lowest price with a MM because you want to trade more quickly, you'd want to keep bumping up the price until a MM hits you, which is often a few cents off the mid.
 
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