Execution of order on single stock options : unusual observation

A

AlphaTango

Hi all,

I've traded single name options for the very first time recently(been only involved in index before). When placing a 'non-standard'(i.e. not a multiple of 0.05) bid inside the displayed market on Interactive Brokers, my bid never shows up on the screen. I use 'smart' routing with default settings.

E.g. if the market is .25/.45 and I go .32/ bid, .32/ doesn't show up on the quote line. However, .30 , .35 & .40 would display. IB shows the order .32/ is being worked('green') with the exchange name next to it. Often I even get executed at these 'non-standard' limit orders even though they never display. I've seen this for multiple tickers (mostly NYSE underlying).

What am I missing here? Is the order going to a specialist (or even internal IB trading desk) who's not displaying the order to the market whilst keeping the free option to fill me at .32 when they get hit/offered any lower?

many thanks.
 
AlphaTango said:
Hi all,

I've traded single name options for the very first time recently(been only involved in index before). When placing a 'non-standard'(i.e. not a multiple of 0.05) bid inside the displayed market on Interactive Brokers, my bid never shows up on the screen. I use 'smart' routing with default settings.

E.g. if the market is .25/.45 and I go .32/ bid, .32/ doesn't show up on the quote line. However, .30 , .35 & .40 would display. IB shows the order .32/ is being worked('green') with the exchange name next to it. Often I even get executed at these 'non-standard' limit orders even though they never display. I've seen this for multiple tickers (mostly NYSE underlying).

What am I missing here? Is the order going to a specialist (or even internal IB trading desk) who's not displaying the order to the market whilst keeping the free option to fill me at .32 when they get hit/offered any lower?

many thanks.
More...
Was this on a penny name?
Because if it wasn't, then exchanges don't accept regular orders at an off-tick price.
If you got filled at an off-tick price,then it's probably because your order was filled through an auction mechanism.
 
rb7 said:
Was this on a penny name?
Because if it wasn't, then exchanges don't accept regular orders at an off-tick price.
If you got filled at an off-tick price,then it's probably because your order was filled through an auction mechanism.
More...

Thanks rb7 and others for taking the time to reply.

It was on US mid to large cap stocks (i.e. >=$2bn market cap). The trade-log for off-tick fills state venues like 'NASDAQOM', 'NASDAQBX + 1', 'BATS', 'PSE + 1'

What puzzled me was that unlike options on indices and futures it let me place off-tick orders.
 
Many equity options trade in $0.01 ticks, so this doesn’t look uncommon per se. Also, if IB lets you place orders at $0.01 increments then this seems to be standard tick for this stock, as otherwise it wouldn’t let you place such orders.
I only don’t understand why you only see bids & asks in $0.05 increments:
Btw, did this stock had a recent split or reverse split?
 
guru said:
Many equity options trade in $0.01 ticks, so this doesn’t look uncommon per se. Also, if IB lets you place orders at $0.01 increments then this seems to be standard tick for this stock, as otherwise it wouldn’t let you place such orders.
I only don’t understand why you only see bids & asks in $0.05 increments:
Btw, did this stock had a recent split or reverse split?
More...

It happened for at least 8 different underlying stocks and there were no splits etc. in the last 12 months.
 
AlphaTango said:
It happened for at least 8 different underlying stocks and there were no splits etc. in the last 12 months.
More...
Btw, stock split doesn't have anything to do with the price increments at which options are trading at.
I also don't understand why you are seeing bids/asks in 0.05 increment only...
 
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