With the spread so wide and so little liquidity, it's nearly impossible to be filled at the bid for buy and ask for sell if you want to be filled right away. Midprice is the best price one can get when using limit orders. Market orders? You are basically at the mercy of the market and it's going to depend on how desperate you need your order filled.
How Often Do You Get Filled At Mid Price In Vertical Option Spreads?
- Thread starter Con1991
- Start date
With the spread so wide and so little liquidity, it's nearly impossible to be filled at the bid for buy and ask for sell if you want to be filled right away. Midprice is the best price one can get when using limit orders. Market orders? You are basically at the mercy of the market and it's going to depend on how desperate you need your order filled.
That's for the MM's and the wholesalers who paid for our orders. That's not available for us retail traders. For us, it's whatever wholesalers want to fill us at. Basically they fill us at one price and then they turn around and go to the market to flip for a profit using whatever system there is in the market, auctions or whatever. That's my speculation. Since there is no transparency so I can't know for sure.
Market orders are an amateur joke. You are basically putting a sign on yourself that says 'rape me' if you use a market order.
I once used a market order for a single SPY option when I was new...to my shock, I got filled way out there, way overpriced.
That was the last time I ever use a market order. Limit only.
Market orders are still useful when you need to tp fast from a profitable trade when the profit is evaporating fast and the spread is wide. But for entry, yeah, one should use limit orders.
It seems, sometimes, it's a lose-lose proposition for you.
If you use a limit order.....your order hangs, and hangs. Doesn't get filled. And if you use a market order, you get raped on price. You can't win. The computers and market makers are screwing your order either way.
I have used mrkt orders on spy options a lot and did not had that experience at all. Got filled between B/A a lot. It were weekly options with maximum deviation of 5% from atm and thus quite liquid though. But I would prefer putting in a lmt and moving it up or down if 'possible'.
I'm not 100% sure, but occasionally I do get better prices than the market/worst price, and quite a few times for sure better than my own limit price. I don't recall placing market orders except when by mistake or on high liquidity options on SPY, APPL, etc, but sometimes I do get better prices than my limit orders.
Theoretically there should be no difference between market vs "wrong" limit orders. Let's say that you want to pay $3.50 for a 5-wide spread but, for example, it may be worth closer to $2.50 and someone else is willing to sell it for that much regardless of the bids/asks on the legs. In such case they should be able to sell it to you for $2.50 via an auction regardless whether your order is market or limit. Otherwise auctions may not make sense to improve the price only for limit orders but not market orders.
There is also possibility that your order (whether market or limit) may match existing orders in the spread book (aka complex order book), where other limit orders are held until their price is matched. In such case you also won't see the right prices on bids/asks of the individual legs, while the full combo may already be priced better and waiting to be filled.