Multi-leg option strategies on IB

L

LaChaim

Guys,

I am about to open a new account to trade options since my current local broker is far too expensive and its platform far too primitive for that purpose. I have been testing (paper money) some strategies on TOS with successful results for the last couple of months and was about to go live. Since it’s more convenient for me to open an account at IB (otherwise would need to convert capital to USD), I thought why not test the same strategies on IB's paper money account first. But I am getting totally different results from IB TWS. Most orders don’t get even filled. I read on this forum that it has to do with IB’s algorithm of sending orders to the exchanges.

( https://www.elitetrader.com/et/threads/option-fills-on-thinkorswim-vs-ib.286890/ )

I tried sending the orders directly to exchange bypassing SMART and managed single orders but for multi-leg orders this option is disabled and you are forced to go through SMART. I read on IB’s tutorial you can choose a non-guarantee style fill for those combo orders but I haven’t figured out how and I am not sure if that’s the right approach.

I am sure lots of professionals trade multi-leg option strategies on IB and wonder how they deal with this issue.
 
LaChaim said:
Guys,

I am about to open a new account to trade options since my current local broker is far too expensive and its platform far too primitive for that purpose. I have been testing (paper money) some strategies on TOS with successful results for the last couple of months and was about to go live. Since it’s more convenient for me to open an account at IB (otherwise would need to convert capital to USD), I thought why not test the same strategies on IB's paper money account first. But I am getting totally different results from IB TWS. Most orders don’t get even filled. I read on this forum that it has to do with IB’s algorithm of sending orders to the exchanges.

( https://www.elitetrader.com/et/threads/option-fills-on-thinkorswim-vs-ib.286890/ )

I tried sending the orders directly to exchange bypassing SMART and managed single orders but for multi-leg orders this option is disabled and you are forced to go through SMART. I read on IB’s tutorial you can choose a non-guarantee style fill for those combo orders but I haven’t figured out how and I am not sure if that’s the right approach.

I am sure lots of professionals trade multi-leg option strategies on IB and wonder how they deal with this issue.
More...
The paper money account isn't going to give you anything like live results, certainly not on IB but probably anywhere. Especially with options orders. Especially especially with complex orders. It basically will only issue a trade if an actual trade occurs at your price or your limit hits the bid/ask respectively, i.e. it would execute as a market order. Leg by leg. So it wouldn't show any midpoint fills you'd normally get or any COB fills you'd get.

The paper trade account is useful to get familiar with the interface and ensure you don't mistakenly enter an order opposite what you intended, that's about it.
 
LaChaim said:
Guys,

I am about to open a new account to trade options since my current local broker is far too expensive and its platform far too primitive for that purpose. I have been testing (paper money) some strategies on TOS with successful results for the last couple of months and was about to go live. Since it’s more convenient for me to open an account at IB (otherwise would need to convert capital to USD), I thought why not test the same strategies on IB's paper money account first. But I am getting totally different results from IB TWS. Most orders don’t get even filled. I read on this forum that it has to do with IB’s algorithm of sending orders to the exchanges.

( https://www.elitetrader.com/et/threads/option-fills-on-thinkorswim-vs-ib.286890/ )

I tried sending the orders directly to exchange bypassing SMART and managed single orders but for multi-leg orders this option is disabled and you are forced to go through SMART. I read on IB’s tutorial you can choose a non-guarantee style fill for those combo orders but I haven’t figured out how and I am not sure if that’s the right approach.

I am sure lots of professionals trade multi-leg option strategies on IB and wonder how they deal with this issue.
More...

My option orders get executed pretty much the same at all brokers/platforms. I prefer IB but occasionally other brokers may get faster fills. IB does send complex/multi-leg option orders directly to exchanges and I get many orders filled simultaneously at several exchanges (the qty gets split up between exchanges), but not always. Sometimes orders may not get sent to exchanges if the price is too far off from a reasonable price that may get filled.
In paper trading IB may also be more realistic than ToS, but in live trading both should get similar fills.

Non-guaranteed orders usually apply to multi-leg option combos where one or some of the legs may not be guaranteed. But that’s advanced stuff that most people don’t use.
Whatever you wrote won’t make much sense to people who actually trade, so you need to trade real money to understand the process. I totally agree with Sig.
 
Sig said:
The paper money account isn't going to give you anything like live results, certainly not on IB but probably anywhere. Especially with options orders. Especially especially with complex orders. It basically will only issue a trade if an actual trade occurs at your price or your limit hits the bid/ask respectively, i.e. it would execute as a market order. Leg by leg. So it wouldn't show any midpoint fills you'd normally get or any COB fills you'd get.

The paper trade account is useful to get familiar with the interface and ensure you don't mistakenly enter an order opposite what you intended, that's about it.
More...

Thanks I understand now how paper trading works on IB.
This video is also interesting although not completely related to my OP.
 
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