Just stating how my positions have always been marked.
Etrade options marking methodology
- Thread starter newwurldmn
- Start date
Just stating how my positions have always been marked.
... I had to laugh at that.... 
@newwurldmn what if you use your own reporting tool? I find most greeks on options reported by brokers are off anyway.
I don't trade options a lot, but watch them often.
I wonder sometimes if anyone here really trades.
Whenever a stock halts, or there's any news creating volatility, the MM's back away big time, sometimes for long periods, where the ask goes $5 even if the option is only worth 50c.
See this ALL THE TIME.
No broker in their right mind can mark to the mid during those periods.
I wonder sometimes if anyone here really trades.
Whenever a stock halts, or there's any news creating volatility, the MM's back away big time, sometimes for long periods, where the ask goes $5 even if the option is only worth 50c.
See this ALL THE TIME.
No broker in their right mind can mark to the mid during those periods.
I have ca. 250 option trades this year (One open+close being one trade) with about 200 of those being stock and not index trades. What you say is not incorrect but its just something you need to take into account when you trade.
As a prior aside - having good option pricing software helps. If you price inside a broad bid/ask spread at a reasonable price you may very well get execution. Yes I will give a nickel or a dime here and there to make it happen. The broker is not the only one trading, there are other retail or institutionals that may pick up your bid/ask.
If you are trading directionally with longer running options then you do have a bid/ask spread and you have to be a little wary not to trade in stocks with very light volume. Nevertheless I have encountered very few problems. The high volume ones though are not problematic to trade and the bid/ask spread whilst relevant (every nickel counts) isnt really the decider on whether a trade is profitable or not.
If you are trading non-directionally you have to be more careful. If you are trading out of the money the problem you point out can occur at awkward moments and you tend to be in situations that you really need to get out of a trade. I have made mistakes in this respect in the past and even posted about them here. Having said that in the vast majority of cases the biggest issues occur around earnings. Stocks under a bid (like MON or NPXI) also show huge gaps but thats understandable. For a smaller stock it can take several days after an earnings announcement before the options market get back to reasonable pricing.
This has happened to me trading earnings on Thor Industries last year. The trade went exactly as it should except I couldn't get execution. To get out of the position I had to wait 3 days and sacrificed a sensitive part of the profit to make it happen. If the options only have day(s) to run this can get difficult. On liquid stocks like AAPL and NFLX apart from the half hour at the opening I havent really encountered big issues except way ITM or OTM. Best recommendation is to be cautious with less liquid stocks which then becomes a self-fulfilling prophecy as everyone winds up trading GOOGLE and AAPL. The other things is that you shouldnt count on being able to pick up pennies in front of the oncoming train - some trades that look hypothetically feasible based on closing prices are impossible to execute consistently in reality. Hence always make sure you pick up sufficient credit when doing a credit trade, I aim for at least 1$ at the very low end.
As a prior aside - having good option pricing software helps. If you price inside a broad bid/ask spread at a reasonable price you may very well get execution. Yes I will give a nickel or a dime here and there to make it happen. The broker is not the only one trading, there are other retail or institutionals that may pick up your bid/ask.
If you are trading directionally with longer running options then you do have a bid/ask spread and you have to be a little wary not to trade in stocks with very light volume. Nevertheless I have encountered very few problems. The high volume ones though are not problematic to trade and the bid/ask spread whilst relevant (every nickel counts) isnt really the decider on whether a trade is profitable or not.
If you are trading non-directionally you have to be more careful. If you are trading out of the money the problem you point out can occur at awkward moments and you tend to be in situations that you really need to get out of a trade. I have made mistakes in this respect in the past and even posted about them here. Having said that in the vast majority of cases the biggest issues occur around earnings. Stocks under a bid (like MON or NPXI) also show huge gaps but thats understandable. For a smaller stock it can take several days after an earnings announcement before the options market get back to reasonable pricing.
This has happened to me trading earnings on Thor Industries last year. The trade went exactly as it should except I couldn't get execution. To get out of the position I had to wait 3 days and sacrificed a sensitive part of the profit to make it happen. If the options only have day(s) to run this can get difficult. On liquid stocks like AAPL and NFLX apart from the half hour at the opening I havent really encountered big issues except way ITM or OTM. Best recommendation is to be cautious with less liquid stocks which then becomes a self-fulfilling prophecy as everyone winds up trading GOOGLE and AAPL. The other things is that you shouldnt count on being able to pick up pennies in front of the oncoming train - some trades that look hypothetically feasible based on closing prices are impossible to execute consistently in reality. Hence always make sure you pick up sufficient credit when doing a credit trade, I aim for at least 1$ at the very low end.
This morning (at 10:30) my pnl was down 30,000. Of that, 20,000 was dumb marks meaning I'm really down 10,000. Right now my pnl is -5,000 and bad marks are -10,000 and +15,000 meaning, I'm really down 10,000. This makes sense but I have to spend more time verifying that something in my single stock basket isn't blowing up. It creates a poor allocation of my time and mental energy.
I am surprised more people aren't bothered by this concept of marking to mid vs the algo that was used before.
I am surprised more people aren't bothered by this concept of marking to mid vs the algo that was used before.
IF you require accurate near real-time PnL tracking, you may want to investigate other tools to address that (that don't pull the rug out from under you). (Assuming your broker does not address this quickly). OptionNetExplorer, was good the last time I used it. You may also create your own (but amount of development effort is likely not worth your time)