Credit Spread Question

T

torontoman

Is it better to leg into a credit spread OR enter the order as a credit spread if the comission is the same?

Yesterday, I tried to get an spx credit spread.

sell 10 spx 1440 calls bid/ask 5.4 / 6.2
buy 10 spx 1450 calls bid/ask 2.95 / 3.4

If we take the middle value, I would get a credit worth 2.6.

I entered the order for 2.6.

These b/a spreads did not change so much for a few hours and I found myself lowering the credit as time went by because my order wasn't filled. I finally had to lower it to 2.05, 5 cents away from market and still no fill.

What did I do wrong?
 
you did nothing wrong... index options are illiquid from what I understand and it's quite tricky to get fills...

It drives me crazy too, because the options exchanges charge for cancels...

cheers!

mnx

Quote from torontoman:

Is it better to leg into a credit spread OR enter the order as a credit spread if the comission is the same?

Yesterday, I tried to get an spx credit spread.

sell 10 spx 1440 calls bid/ask 5.4 / 6.2
buy 10 spx 1450 calls bid/ask 2.95 / 3.4

If we take the middle value, I would get a credit worth 2.6.

I entered the order for 2.6.

These b/a spreads did not change so much for a few hours and I found myself lowering the credit as time went by because my order wasn't filled. I finally had to lower it to 2.05, 5 cents away from market and still no fill.

What did I do wrong?
More...
 
A couple thoughts:

1) How quickly did you lower your asking price? If I were sitting watching and saw someone continually lower their ask, I'd just wait too.

2) You're trading a relatively illiquid option. OEX and SPX are not known for tight spreads or quick fills. Take a look at SPY options if you want more liquidity.

The bottom line is that no one was interested in the midpoint, or even anything above their bid. There's not much you can do about that. :-)
 
Quote from mnx:

you did nothing wrong... index options are illiquid from what I understand and it's quite tricky to get fills...

It drives me crazy too, because the options exchanges charge for cancels...

cheers!

mnx
More...

SPX is illiquid?

I sent your order (10 contract) to the ThinkOrSwim (TOS) trade desk and ask for the pit price.

Trade desk come back with 2.8-3.2? He said I should send it at $3.00. Definitely would be better than 2.60

You may want to try TOS. They will call down to the pit and ask and get it fill. There is no broker assisted order charge.
 
Quote from torontoman:

Is it better to leg into a credit spread OR enter the order as a credit spread if the comission is the same?
What did I do wrong?
More...
The one that works better is the better choice (higher credit or lower debit).

Legging in is better if you have the ability to catch a small trend yet are disciplined to add the 2nd leg quickly if you're wrong. The deer in the headlights trick is a killer :)

It's a bit tough to leg in when you're dealing with illiquid options or wide spreads. There, it's usually better to try to nick something off the respective B/A's, either getting an acceptable fill or nothing at all.
 
atozcom,

Can you tell us a little more about asking for quotes from the pit? Specifically I am wondering:

- do you typically ask for "a market" on the spread, as opposed to asking for the bid or offer?

- how do the markets quoted compare to the bid/ask spread quoted electronically for the individual options?

- how close are you able to get filled to TOS's fair value, in the case you quoted 3.00?

- what is the minimum size the pit likes to quote on?

- what size is the market quote from the pit usually good for?

Thanks, and anything you can add, for example how long it takes to get the quote and then a fill would be much appreciated.
 
Quote from atozcom:

SPX is illiquid?

I sent your order (10 contract) to the ThinkOrSwim (TOS) trade desk and ask for the pit price.

Trade desk come back with 2.8-3.2? He said I should send it at $3.00. Definitely would be better than 2.60

You may want to try TOS. They will call down to the pit and ask and get it fill. There is no broker assisted order charge.
More...

Did you get filled at 3.0? You can send the order at $3.0, but it doesn't mean your order will get filled. TOS always suggests you to send the order at mid.

I use TOS, and I have never get filled at mid.
 
Quote from FullyArticulate:

A couple thoughts:

1) How quickly did you lower your asking price? If I were sitting watching and saw someone continually lower their ask, I'd just wait too.

2) You're trading a relatively illiquid option. OEX and SPX are not known for tight spreads or quick fills. Take a look at SPY options if you want more liquidity.

The bottom line is that no one was interested in the midpoint, or even anything above their bid. There's not much you can do about that. :-)
More...

Are we saying that it is better to do credit spreads on the SPY instead of the SPX?
 
Quote from One:

atozcom,

Can you tell us a little more about asking for quotes from the pit? Specifically I am wondering:

- do you typically ask for "a market" on the spread, as opposed to asking for the bid or offer?

- how do the markets quoted compare to the bid/ask spread quoted electronically for the individual options?

- how close are you able to get filled to TOS's fair value, in the case you quoted 3.00?

- what is the minimum size the pit likes to quote on?

- what size is the market quote from the pit usually good for?

Thanks, and anything you can add, for example how long it takes to get the quote and then a fill would be much appreciated.
More...

I asked for a vertical. You really don't need to say buy or sell. I would say: what is likely fill price of this blah blah blah iron condor? They come back with a bid/ask.

My electronic showed 3.2 when I asked, right now 2.80, 2.75

My experience is that, let say if he say $3.00 would likely be fill and if I say can you get this filled at $2.95, the guy will likely to say I am going to try it for you. The many time that I tried. They got it fill.

There is no minimum to ask for quote. They don't care. They will call for you.

The worst thing that can happen for asking is that it is never worst than what you get yourself!!!

TOS fills at better than mid price lot of time.
 
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