Market order with IB

This is why I fired IB and went to TOS. IB will never NEVER take the customer's side of a story in a trade inquiry, and give you some smug "FU" answer in response. I had a horrible fill just like yours once when i entered a Buy instead of a sell and they wouldn't do anything for me. Sure it was my fault, but they didn't even make an attempt to do anything for me.. Wouldn't even waive the commission... Really pissed me off. I am a high volume options trader and they really disrespected me and would not help me out one iota. i hope they enjoyed the couple of thousand dollars their traders made off me that one day, because now I pay that much to TOS on a weekly basis.

IB was no friend to me. Good riddance.

Quote from yabz:

I have received this explanation from IB:

"When you use a market order prior to the open; you will get the opening ask price for the option. The opening bid ask for the option was no bid at .20. That is why you paid .20. ( it was the opening ask ). If you wanted to limit what you pay for an option; you need to use limit orders. "
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IB is the market maker in many options or only market maker for some of these illquid options.

the option broker got for $5 and sold it for $20 for somebody who is inexperienced or stupid in using market order for options. market makers markup in options is like 100% in some options.

OTM options don't have fair value but any price the market maker want for it since there is only one market maker.


Quote from Div_Arb:

This is why I fired IB and went to TOS. IB will never NEVER take the customer's side of a story in a trade inquiry, and give you some smug "FU" answer in response. I had a horrible fill just like yours once when i entered a Buy instead of a sell and they wouldn't do anything for me. Sure it was my fault, but they didn't even make an attempt to do anything for me.. Wouldn't even waive the commission... Really pissed me off. I am a high volume options trader and they really disrespected me and would not help me out one iota. i hope they enjoyed the couple of thousand dollars their traders made off me that one day, because now I pay that much to TOS on a weekly basis.

IB was no friend to me. Good riddance.
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Couple of items here.

1. I personally have called exchanges on behalf (and even before) clients call us on obvious errors. To say we never do anything on behalf of the client is wrong.

2. I was given the impression the order was $20 in the post. It was .20 cents. That's a HUGE difference. If the order was within the legal spread, an exchange won't bust it. I have no idea who was on the other side of the exchange but it doesn't matter. The market maker making the quote on the open has no idea if news is about to come out and the stock will take off. It's a cheap option with limited upside if you sell with unlimited potential loss. Watch the open on any particular stocks. I don't think very tight option markets are made immediately a 9:30 in every option strike.

3. I also do not think a phone call was made to the trading desk immediately after the trade. However, do note most exchanges charge fees to but trades (or even request a bust). In this case $20 probably wouldn't cover that cost and it wouldn't be worth busting.
 
Quote from def:


2. I was given the impression the order was $20 in the post. It was .20 cents. That's a HUGE difference. If the order was within the legal spread, an exchange won't bust it.
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What is the legal spread?
 
Quote from yabz:

I put in an order before the market opened to buy WFC Jan 31 call at market price. The previous closing price was $5.

The order was filled at 9.30:23 am at $20! The next price was $5. How is this possible? Its clearly very risky making buy or sell orders at market price...
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So, what was it in fact? was the price on the option 0.20 or 20$? If it was 0.20 then it's obviously easy to understand that one trade was made at 0.20 and the next at 0.05. No issue here. You just paid the spread on an out of the money option. Business as usuall. Am I right? Or was the price really 20$ (meaning in the money most likely)?
 
Quote from total_keops:

So, what was it in fact? was the price on the option 0.20 or 20$?
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I paid 0.20 - clearly better than $20, but a fair price would have been .05. I basically paid 4 times what it was worth.

.20 was the overnight spread, and I had expected that a market order would have given me something closer to a market price...
 
Quote from yabz:

I paid 0.20 - clearly better than $20, but a fair price would have been .05. I basically paid 4 times what it was worth.

.20 was the overnight spread, and I had expected that a market order would have given me something closer to a market price...
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It's not rare to see a 0.05 bid 0.20 ask. So you wanted to buy and paid the spread. That's it that's all. That's how market makers make money.
 
Quote from Div_Arb:

I had a horrible fill just like yours once when i entered a Buy instead of a sell and they wouldn't do anything for me.
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That's totally out of order. They should definitely have contributed towards the medical fees for your brain transplant.
 
Unfortunately you haven't presented a good example of how IB screws customers -- in this case if you had called the trade desk (and were fortunate enough to get thru in a reasonable amount of time-- unlikely) they would have blown you off -- and they would be right to do so.

You can use market orders - tho i seldom do (especially on options & never on OTM options). You must know the liquidity & spread (bid/ask) tho.

If you saw .05 by .20 on an option that was $5.28 OTM with 6 days til expiration & put in a market order to buy & had made money on the trade the SEC would be contacting you to find out what you knew and how you knew it -- lesson learned.
 
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