IB has lots of problems with Option Trading

A

alexandert

I had been very happy with IB future trading and decided to open an account to trade options. However, I discovered multiple issues with the way they handle options and forced to move my account to a competitor. My advice to any new trader who wants to trade options – do not bother with IB they basically sock.

For example:

- I trade stock index options, which have European expiration stile. One of my strategies is Condor with 2 legs bull and bear. When my friend trades the same strategy with Options Express they correctly recognize that the maximum possible loss on this strategy is equal the spread on either one and therefore the margin is based on a single leg. IB does not!!!
It makes a half of my trading capital obsolete.
- They recently implemented spread trading and created a lot of hype about the computerized execution. However, me and my friend discovered many times that we create the same limit spread order (his with option express and my with IB) and his order fills in 10 – 20 minutes while mine never gets filled unless I substantially lower my limit price. Couple times my spread order was filled 5 cents below the limit price.
- Even if your spread has expired the same day morning and settlement prices are known in the afternoon the margin with the expired contracts still tied up till Saturday morning!!!. It is very important for me to be able to put new position on the same day and again my friend with option express can do that. IB does not give a *&%*(&.!!!
 
you're dreaming. i've done at least 10,000 option trades with ib in 3 years and there fills are unmatched. i'm talking straight puts calls and selling naked. i've been with mb trading fidelity and the rest and ib's the best. now futures and stocks they're way too expesive and i find there futures order entry arcaic and very cumbersome.
 
Which exchange are you sending your spread orders to? Can you choose at optionsexpress? Maybe you should send the spreads to different exchanges to compare the fills.
 
"you're dreaming. i've done at least 10,000 option trades with ib in 3 years and there fills are unmatched. i'm talking straight puts calls and selling naked. i've been with mb trading fidelity and the rest and ib's the best. now futures and stocks they're way too expesive and i find there futures order entry arcaic and very cumbersome."

I never trade naked options. Maybe that is why my experience is different. I trade spreads. Vertical spreads to be exact. On a vertical spread you need 2 orders to be filled as a part of single transaction. For example you might want to sell a put out of the market and buy another put even more away from the market. You pocket the difference in premium. Every 5 cent on the difference means $5 per contract. So if you trade 10 contracts it would create $50 difference. It is very, very important to get a good fill on the spread. A friend of mine that trades with another broker gets on average 10 - 20 cents better fills on the same spreads!!!
We trade the same instrument (SPX options) but after the trade he has 10% - 20% more money on every single execution. This is huge!
By the way if you are interested in leverage only and that what it looks like you are doing I believe futures are better as an instrument.
 
"Which exchange are you sending your spread orders to? Can you choose at optionsexpress? Maybe you should send the spreads to different exchanges to compare the fills."

I trade a single instrument only which is SPX index options. They are traded only on CBOE. Well, it looks like I have to switch to another broker as the only option at this point.
 
when I first started with IB about 2 yrs ago, and would enter a buy or sell for stock options, I would often get filled in between the bid and ask...i.e. at a better price than 'pure' market.

this would happen on a pretty fair percentage of orders...perhaps 2-3 out of 10; and it was a prime reason I moved my trading over from another broker after trying IB.

however, in the past year, these favorable fills have simply gone away... I have not gotten a single "between bid and ask" fill in the past six months. not one.

now, in order to try for better than bid, I must always enter order as 'limit', then if it won't fill, make change-order to bid shown. this makes for more work and (with their new policy of charging fees) higher transaction costs, on any attempt to reduce spreads.

thus, to me it seems very clear that fills on options have degraded.

I do not have the technical background in exchange and broker operations to know or guess whether IB did something in their algorithms which accidentally hurt fills, or whether it was a purposeful change to increase profit at Timberhill; but it is causing me to start looking at other brokers again.

I am sad about that, because overall I thought for quite a while that IB was one of the best.
 
joeyata1, do you find the margin requirements imposed by IB on your naked option sales to be accurate?

I too am disappointed how margin is tied up on the day of expiry of the options. Just last month I got a margin call on the day of expiry for my options, all of which expired OTM.
 
greenfuji i have a very big account so i never really look at my buying power as it's not a factor. i have an ira with ib and i find some of there controls lax. on day a few months ago i play a naked option sell in my ira and they took it which i know is not allowed in any ira on earth. i use ib for options only as there stock and futures commissions are too high. no broker is all to everyone.
 
d9d i agree with your evaluation of stock with them. the little i do with them i can see they don't fill in between ever. i used to use ib only for stocks that crashed and were bouncing. an example recently was when aig was crashing and it reversed. in the old days it seemed with timberhill as there market maker they'd fill any order even if few shares there in auto exection fashion but no more. i think whats happening is margins so tight on amrket macking business they're giving nothing away free. try cyber at .06 a share if unhappy
 
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