How large lots of options get transacted?

[poohbear]

Looking at quotes for options, seems most options are thinly traded, and bid/ask sizes are usually very small, and bid/ask spread big.

So my question is this: what if , say, I want to buy 5000 contracts of call for one specific stock? Obviously I can't hit the ask using market order since there are usually less than 10 on the ask. So is it better for me to calculate the theoretical price using BS or other formula, and put a bid there, waiting someone else to hit it? If I bid a bit higher than the theoretical price, how likely all 5000 will be filled quickly? Is the market maker constantly monitoring the whole market and will take advantage of any small arbitrage opportunity so my unusually large bid can be filled quickly even though it looks like there's little transactions for the specific contract?

Or is it usual practice for such large order I can call the market maker and get a quote from him directly?

Anyone have idea how this works?

Thanks

 

[ellevers]

if you are trading 5000 contracts at a time I wouldn't think you would need any advice. But if you are going to trade that kind of size almost any etf (qqqq spy dia) can take down that kind of size with no problem.

 

[poohbear]

Quote from ellevers:

if you are trading 5000 contracts at a time I wouldn't think you would need any advice. But if you are going to trade that kind of size almost any etf (qqqq spy dia) can take down that kind of size with no problem.

Look, 5000 is just a hypothetical number. I am simply curious about how the market really works, or whether it's not working at all , since seems to me option marekts are really too thin, even a lot size of 100 will be too large for many stocks.

 

[TorontoTrader2]

Can you do a reserve order on options? Show 100 @ a time but swallow up 1000 contracts, for example?

 

[nitro]

Size in options is transacted by calling up a market maker on the phone. The more edge you are willing to give up, the more size the market maker is willing to do, assuming the underlying is liquid.

In assets like ES, ZN, etc, size is easy to do if you give up "fair" edge.

nitro

 

[poohbear]

Quote from nitro:

Size in options is transacted by calling up a market maker on the phone. The more edge you are willing to give up, the more size the market maker is willing to do.

nitro

Who are market makers? If I have an account at Think or Swim, can I simply call them and let them be market maker to give me a quote?

 

[nitro]

Quote from poohbear:

Who are market makers? If I have an account at Think or Swim, can I simply call them and let them be market maker to give me a quote?

MMs don't deal with retail traders - they deal with institutions or hedge funds (or brokers acting on their behalf if they send the order to the pit). If you have to go through TOS, you can't even step up to the plate. If you don't know who/what a MM is, and you want to do size, well, I will just stop there.


nitro

 

[MTE]

Quote from poohbear:

Who are market makers? If I have an account at Think or Swim, can I simply call them and let them be market maker to give me a quote?

Thinkorswim is a brokerage not a MM. However, you can call their trade desk and they will do the calling for you.

 

[volente_00]

What is the daily average volume for the underlying ?

 

[thegazelle]

If placing a large order with TOS, then click "send to trade desk" on the order screen. Go ahead, try it with a 1 lot. It will give you a little blurb about how its for institutional and large orders.

Or, just call the trade desk. If your doing size, just sweep all the exchanges trading the contracts, you should be able to get a fair amount done with that method.