I guess it depends on the product, but for anything with a cob or equivalent, for sure. Plus you don't have leg-in risk and you don't need a huge margin cushion to trade something like a vertical spread that requires full margin for the first leg of you're legging in.
IB sold me put vertical for a large debit that should have been a credit
- Thread starter ET180
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Cob is a complex order book, essentially your combo is traded as a combo there vice as individual legs. I can't see that you'd ever be worse off trading a combo if you want a combo all traded at the same time, and you could end up much better off.
Given that you're trying to do it all instantaneously, I wouldn't think you'd ever do worse on the COB since any difference between that and the individual legs would be instantly arb'd away. I suppose there might be a situation where there are big spreads on both the legs and the COB and you get a buyer or seller who puts in a limit order on one of the legs that makes the leg-in a better deal, but that would be pretty rare. You can certainly try splitting your next few orders in half and entering half as a leg-in and half as a complex order and see what the difference is on fills, as that would be real truth as opposed to listening to me on the internet who might not know what the heck I'm talking about.
The advantage of putting an order in the COB is that less edge is required to fill that order then if you leg each part individually. If you are doing an Iron Condor in the SPX for example, the market may be only .10 wide in the COB. Compare that with how much edge you have to give up if you leg each part individually (hint, you give up a lot more this way)
When you enter an order as a spread it will generally be sent to the COB by your broker. I would strongly advise using a limit order and walking the price up or down until you are filled.
When you enter an order as a spread it will generally be sent to the COB by your broker. I would strongly advise using a limit order and walking the price up or down until you are filled.
Depends on the day, depends on the market, depends on the spread.
I have *generally* found that legging into or out-of a vertical will cost me $$ *or* cost me lots of time/attention. "Paying the vig!"
If I'm doing a broken-wing butterfly, I *generally* enter as a complex combo, getting either quicker fills, or better fills, or both. *Exiting* has been a 50|50 set of outcomes. But I *always* set up the individual verticals, if only to know where the best price is.
For ICs, I also set up the individual legs, but will work both the individual verticals and work the IC complex combo, usually favoring the put verticals + call verticals approach, for faster fills (and strike flexibility) at better prices (or both). But I'd never work an IC without having the individual verticals right in front of me.
For the OP: Yeah. Sometimes seeing the fills on an IC sucks. But to summarize (possibly) what everyone else had said, IB is a direct market access entity -- don't blame them.
You make a good point about more complex orders, I only ever do simple vertical spreads for which I think the COB is almost universally better. However if you're doing some crazy iron condor with a broken winged butterfly in its mouth combo it's very possible that no-one will be quoting you on the COB so you'll just get the aggregate of the legs anyway. In that case, I think you may be better off breaking it into several simple combo's and executing them separately.
Noooo, nothin' like that. But I loved your description.
It seems though (in all seriousness) that the OP's query has gotten responses that, when taken together, describe something like a U-shaped Laffer Curve where, with vig on the vertical access, you pay more with individual strikes, least with a two-strike combo, maybe a hair more with a BWB, and then *more* vig -- possibly back up to the individual-strike level, with an IC.
Hmmmm. That's quite an insight -- been doing this for many an expiration.... and have never had cause to put it so specifically. Huh.
Thanks, OP! (And Sig!)