What is the BOX's overall marketshare? Like 3%? Oh but IB owns a lot of the BOX.
Commissions on Options Trades
- Thread starter EliteTraderNYC
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What is the BOX's overall marketshare? Like 3%? Oh but IB owns a lot of the BOX.
Commission prices are a trading red herring in my view. I prefer service, trading more and smaller, and being properly capitalized. I do get a little special treatment, even though I don't do anywhere near the most trades per year.
In day trading they matter a lot since commissions eat up a lot of profit. In position trading they matter not a bit because saving 2 dollars a trade on say 1000 trades, is miniscule compared to the returns you had better be shooting for. They may have more impact on swing trading than position trading.
If one's focus is on getting the best bargain, I one's time should be spent on getting the best trade. You will live longer and earn more in the long run.
In day trading they matter a lot since commissions eat up a lot of profit. In position trading they matter not a bit because saving 2 dollars a trade on say 1000 trades, is miniscule compared to the returns you had better be shooting for. They may have more impact on swing trading than position trading.
If one's focus is on getting the best bargain, I one's time should be spent on getting the best trade. You will live longer and earn more in the long run.
You are right but as def humbly mentioned, IB claims is "one of the bests" in industry. That suggests that there a few good brokers. You have to feel good about your broker. If you have a good broker but you always feel that your are being cheated, that won't work. IB is not for everyone. IB's low commission does not mean that they are cutting the corners and you are getting a sub par service. Check out thier margin rate. Absolutely fantastic. There are tens of brokers who still charge you 9% for margin. IB's margin is about 1.5%.
The IB block desk has instant access to the SPX pit and can get markets on anything you want direct from the floor in seconds, with or without a delta tie, just like any good broker. They work with the biggest contras in the business to provide liquidity and price discovery in multiply-listed names as well. And yes, this desk is only available to those who trade in size of at least a hundred contracts per leg.
If you trade institutional size you would know that SPX screen markets mean nothing, but mid-point of the quoted SPX market is often achievable, and at commissions of far less than $2 per contract (.95 + .44 exch fees).
And again, while commissions are not a trivial matter, the biggest 'cost' of trading is always the quality of execution. As a position trader and not a day-trader, I worry about liquidity and trade price MUCH more than commissions.
Right, which is exactly why institutional clients are willing to pay higher commissions to get better liquidity and better execution.
I have nothing against IB or other high-scale retail brokers and can envision situations why I'd use them myself (small-size personal account would be it), but for anything professional I'd go with a real prime broker and real sales coverage. For the record, I've been both on the buy-side and on the sell-side as a vol trader.
A point about calling up to get option spread quotes. Having been on both sides for years (we would send orders to other floors, with buy 250 xx calls, sell 125 yy calls with a delta of 50 price range of x plus or minus $2, that type of thing. And, having to quote to individuals and institutions on a daily basis. They would ask for a quote on the Feb 60 conversion (we do the other side, the reversal, our favorite. We wanted to sell stock, collect interest, sell puts, collect interest, buy calls to hedge, all 3 sides). In the pit, we would normally act collectively to get the highest price possible to do all 3 sides at once. Just like writing ourselves a check.
Same thing today, if you get filled on something of value, think about it a bit....why are these guys letting me do this? Am I outsmarting the best traders in the world? Maybe, maybe not. Just think aboutit.
Now, legging in is risky, of course, but risk brings reward. Another reason to just think through all these basic options strategies, from calendars to IC's etc.
All the best,
Don
Same thing today, if you get filled on something of value, think about it a bit....why are these guys letting me do this? Am I outsmarting the best traders in the world? Maybe, maybe not. Just think aboutit.
Now, legging in is risky, of course, but risk brings reward. Another reason to just think through all these basic options strategies, from calendars to IC's etc.
All the best,
Don
Mr. Falconview. I hope I didn't upset you with my "show your work" request? I was merely hoping to see you put down the basics, here I am, here I would be up $2, or down $2, and a few days down the road. And, think "sell" LOL.
And, if you're playing direction anyway, think about the underlying with stops, a lot cheaper most of the time.
All the best,
Don
And, if you're playing direction anyway, think about the underlying with stops, a lot cheaper most of the time.
All the best,
Don
First of all, "the best traders in the world" can not be right every single time. Second of all, it's the layoff/volarb accounts that usually are the smartest guys in the room - that's why their flow is usually considered toxic by the market-makers themselfs.
But most importantly, market-makers are playing a different game. Because they have a different book structure, different access to flow and different risk preferences. My value and his value are two different things and both of us could gain on the same or could lose on the same trade, options are weird like that. So on the buy-side I was not particularly worried about the fact that someone is willing to be on the other side of my trade, but I was worried about minimizing my transaction costs and execution hassle.
Fair enough, and yet another reason so many are leaving the trading floors for off-floor trading. On the floor, we would be happy to close the many open positions with conversions and other basics, but rarely open a full new position without a significant edge.
Don