IB TWS sucks for Options trading

[Rationalize]

Quote from tigerwu:

...I don't think life is so good these days for the traditional market makers unless you have a million dollar IT budget.

The surviving electronic market makers do have million dollar IT budgets, generally.

Everyone else has been picked off to the point of "not worth it" being a market maker, unless they're otc.

Have you been living under a rock for the past 5 years? ;o)

 

[syswizard]

Quote from drm7:

Have you looked at Peter Hoadley's option tools? It plugs into the IB datafeed, but does its own calcs.

http://www.hoadley.net/options/options.htm

For $135 ? That's gotta be "bargain of the century" !

 

[tigerwu]

Actually part of my day job was prop trading and supervising a small mkt making operation. We used orc liquidator and still had a hard time competing with the big boyz. The last 5 years was pretty good for prop trading, but volume has dried up on the exchange, so hard to make money providing liquidity.

 

[Rationalize]

Quote from tigerwu:

Actually part of my day job was prop trading and supervising a small mkt making operation. We used orc liquidator and still had a hard time competing with the big boyz. The last 5 years was pretty good for prop trading, but volume has dried up on the exchange, so hard to make money providing liquidity.

haha .. ok, I buy into that. I'd guess that orc liquidator is just on the cusp of being too slow at the moment, depending on the strategy. Speaking of strategy, any tasty clues about what and where?

 

[drm7]

Quote from tigerwu:

The problem is to be able to see the quotes and fire off the orders in real time.

In that case, the only non-institutional platform even approaching your requirements is Optionvue integrated with their "trading partner." You lease Optionvue for $200/mo to $300/mo and it bolts right into the broker's trade engine/API. Transaction costs are $0.75/contract ($7.50 min) and $0.01/share ($10 min).

Again, I don't know much more than the website description - the broker's execution system could be running on a hamster wheel for all I know. I also don't know if you can hedge SPX options, since they don't appear to be a futures broker (I may be wrong, though.)

 

[IBsoft]

We don't mind professional option traders competing with TH for two reasons:
(i) they are going to trade options and compete one way or another; we would rather have them do so through IB, so that we can at least earn a commission
(ii) the brokerage is our growth business; that is where we see long term potential

Quote from Rationalize:

Guys .. I find this statement pretty chilling.

Personally I have a lot of respect for Timber Hill as a market making operation, and try to not be on the other end of their trades if I can help it.

Something about picking your battles.

 

[IBsoft]

One can price index options against index futures. Please see attached.

Quote from tigerwu:

For example:

1) If I trade any index options against futures hedge, TWS can not price options off implied cash (future-basis). So the implied vol numbers you are getting (off the underlying cash index) is not correct.

 

[IBsoft]

One can populate the interest rates automatically. Please see attached.

Quote from tigerwu:

For example:

2) TWS doesn't automatically populate Interest Rate into the pricing model. I guess it's not a big deal when short term rates are around zero. But how about repo rates?

 

[tigerwu]

Not a lot of risk free ways to make money anymore in options. Even the market makers are basically taking short term vol bets these days. Trading option is just like trading stocks now. It all comes down to who's got the fastest connection and the lowest execution cost. Its' great for price takers like myself. . Also the US market is so deep, you can always find some interesting strategies to trade. Just have to adapt and move on..... Those who understand how to take risk will always come out ok.

 

[jayre]

Quote from IBsoft:

We don't mind professional option traders competing with TH for two reasons:
(i) they are going to trade options and compete one way or another; we would rather have them do so through IB, so that we can at least earn a commission
(ii) the brokerage is our growth business; that is where we see long term potential

Yeah, And 65-75% + of IB's profit over the last 5 years was from Timber Hill. To me thats a huge conflict of interest. I don't "trust" that IB will do whats right for its costumers, if there is any chance it could hurt TH profits, its that simple.