How do institutions buy/sell large amounts of options?

[Robert Morse]

When those institution orders get filled by those "small list of large MM or a larger list of smaller MM's", do those orders get reported to the exchanges or the regulatory bodies or do those orders just stay private completely and nobody knows about them? Another of my curiosity question.

All option trades must be reported and put to the tape in a timely fashion based on the rules of those option exchanges. In the past, it required a across that made them subject to the market, but today, I expect some exchanges just let them cross it.

 

[JSOP]

All option trades must be reported and put to the tape in a timely fashion based on the rules of those option exchanges. In the past, it required a across that made them subject to the market, but today, I expect some exchanges just let them cross it.

I am just curious how do I get access to those "small list of large MM or a larger list of smaller MM...that focus on providing liquidity" that you mentioned above? Looks like they are not on the exchanges if my mere 100-contract option order has to be filled in ten thousand partial fills when I sent the order to the exchanges via IB when those 1K or 10K option orders from institutions can be filled with one complete fill.

Would you be able to answer this question, Mr. Morse? How do I get access to those "small list of large MM or a larger list of smaller MM...that focus on providing liquidity" that you mentioned above?

Thanks

 

[Robert Morse]

Would you be able to answer this question, Mr. Morse? How do I get access to those "small list of large MM or a larger list of smaller MM...that focus on providing liquidity" that you mentioned above?

Thanks

Through your broker and not direct. We have a small institutional desk in Chicago that has relationships with some option market makers to source liquidity. As an institutional customer of ours, you will call our desk to enter those orders and provide instructions. Ee would charge our normal commissions plus a broker fee to use that desk.

Bob

 

[truetype]

As Rmorse says, via your broker. When you get to be yuuuge, you can explore direct relationships with Susq, Jane St, et al.

 

[JSOP]

Through your broker and not direct. We have a small institutional desk in Chicago that has relationships with some option market makers to source liquidity. As an institutional customer of ours, you will call our desk to enter those orders and provide instructions. Ee would charge our normal commissions plus a broker fee to use that desk.

Bob

But I thought sending an order electronically to IB's platform is already through my broker?? So what do I have to do? Phone IB? How do you qualify as an institutional customer? I am just trading for myself, not like a hedge fund or for a company or anything fancy like that. What if I don't qualify but need to do larger orders from time to time? I would still have to work with the liquidity in the exchange? I thought everybody is supposed to route their orders through to exchanges and get matched there, didn't know that options market is still kinda two-tiered with "institutions" still being able to get their orders filled in a little group off-exchange.

 

[Robert Morse]

But I thought sending an order electronically to IB's platform is already through my broker?? So what do I have to do? Phone IB? How do you qualify as an institutional customer? I am just trading for myself, not like a hedge fund or for a company or anything fancy like that. What if I don't qualify but need to do larger orders from time to time? I would still have to work with the liquidity in the exchange? I thought everybody is supposed to route their orders through to exchanges and get matched there, didn't know that options market is still kinda two-tiered with "institutions" still being able to get their orders filled in a little group off-exchange.

You switched from general question to specific to IB. I'm not really sure why you think a retail account with retail order flow even needs the help of a trade desk. IB had one when they owned Timber Hill. Call them and ask what the cost is and if you have access. I do not expect it is worth the cost for liquid options. You need to learn to work your orders to find market makers that find an edge with your orders. Or, never trade illiquid options. I would go with never trade illiquid options.

 

[JSOP]

You switched from general question to specific to IB. I'm not really sure why you think a retail account with retail order flow even needs the help of a trade desk. IB had one when they owned Timber Hill. Call them and ask what the cost is and if you have access. I do not expect it is worth the cost for liquid options. You need to learn to work your orders to find market makers that find an edge with your orders. Or, never trade illiquid options. I would go with never trade illiquid options.

My broker is IB and because you stated in your response

Through your broker and not direct.

Bob

so I mentioned IB. In general yes I am interested in finding out how to get access to more liquidity for my option orders when its size is at least 100 contracts. So you are saying the only way to get access to these "small list of large MM or a larger list of smaller MM...that focus on providing liquidity" that you mentioned before is through a trade desk? Do you know which brokers or companies would offer these kind of trade desk? And also how do I work my orders to find market makers for my orders?

IB had subsequently closed Timber Hill down because it was losing IB too much money apparently. And since then, the liquidity has been horrible. And I don't trade illiquid options. I trade options on stocks like INTC. This one time it took me 2 hours to get an 20-contract option limit order filled and I routed it through SMART order routing; I didn't even direct route to any specific exchange. Now when my order has 100 contracts, like I said I am getting 10,000 partial fills and this is during "normal" market time. In those market crash time, I am just concerned that it's going to be big trouble for me to move my option order.

 

[Robert Morse]

And also how do I work my orders to find market makers for my orders?

Change limits until one responds. MM are automated and look for edge. Try DMA vs SMART and choose an exchange with no fee like PHILLY. See if that help.

 

[OptionsOptionsOptions]

In those market crash time, I am just concerned that it's going to be big trouble for me to move my option order.

Market Order

 

[ktm]

My broker is IB and because you stated in your response
so I mentioned IB. In general yes I am interested in finding out how to get access to more liquidity for my option orders when its size is at least 100 contracts. So you are saying the only way to get access to these "small list of large MM or a larger list of smaller MM...that focus on providing liquidity" that you mentioned before is through a trade desk? Do you know which brokers or companies would offer these kind of trade desk? And also how do I work my orders to find market makers for my orders?

IB had subsequently closed Timber Hill down because it was losing IB too much money apparently. And since then, the liquidity has been horrible. And I don't trade illiquid options. I trade options on stocks like INTC. This one time it took me 2 hours to get an 20-contract option limit order filled and I routed it through SMART order routing; I didn't even direct route to any specific exchange. Now when my order has 100 contracts, like I said I am getting 10,000 partial fills and this is during "normal" market time. In those market crash time, I am just concerned that it's going to be big trouble for me to move my option order.

Have you tried adding an "all or none" attribute to your IB orders? I don't think they work for FOPs, but it should work for equity options.