Option Liquidity

S

StockApprentice

I've just started to trade options and I have become increasingly frustrated by the lack of liquidity... even on Index Options. I've been trading with IB and I am wondering if there is:

1) Cheap software that will allow me to see the "depth" of the market. (something other than just level 1)

2) Which Options have liquidity? I have been trading OEX and SPX today and the liquidity is terrible. Any pointers on this?

Thanks again for any advice that you might have. :D
 
Which strike price are you trading on the OEX? I thought liquidity was good today, as it usually is during expiration week.
 
I was trading: SPX and OEX today. I bought OEBMP and SPTMJ today.... I swear that after watching the market for 4 hrs I didn't see more than 15-20 trades go through....

The more that I think about this the more that I realize that this is a problem with IB... Does anyone have any suggestions? IS there a limit on the number of tickers that I can be running at the same time? Is IB always this bad? If they are then I have to seriously consider finding another broker....

Thanks for your help!
 
stockapprentice,
think about it. OEX is an open outcry market. How do you expect depth to be posted?

IB posts the prices and trades from OPRA which is basically the exchange feed. It also routes all orders to the exchange. If your price is better or equal to the market, you should see it posted.
 
Originally posted by def
stockapprentice,
think about it. OEX is an open outcry market. How do you expect depth to be posted?

IB posts the prices and trades from OPRA which is basically the exchange feed. It also routes all orders to the exchange. If your price is better or equal to the market, you should see it posted.
More...

Wow, is my face red... I should have known that! :eek:

Okay, I really want to learn how to trade these index options profitably... Do you guys have any pointers? Yesterday I was trading PSX and had the bid and the ask at a 1.0 + spread! That equates to $100+ which is really twice as much risk if the market decides to move either way....

It also seemed like I had the "market maker" (even though I don't think that there is one per se for options trading) trying to manipulate my trades yesterday.... For example.... I entered a stop limit (14.20 and 14.00)order and the next thing I knew I saw the market maker alter his price to $14.20 as he tried to make my order executable... It could have been mere chance, but the market wasn't trending back up yet at that time and it seemed like an odd occurrence...

Alright, all of this is really psycho-babble.... If you care to respond please do so. Thanks
 
what exchange were you routing to? what strike, and expiration were you trading. This info is important to provide you a decent answer.

for trading options, the most liquid options are at and slightly above the money. you mentioned that you trade with IB. Stick to best ex for options as it will preference exchanges that have electronic order routing turned on.

As for stop orders. Is it possible that you submitted the order incorrectly? Otherwise, it would have been a coincidence.
 
Def:

You stated that IB 's Best Execution preferences exchanges that have auto turned on. OPRA sends out a field that is supposed to identify that, but it has never been accurate. How does IB identify an auto execution on scenerio?
 
Originally posted by def
what exchange were you routing to? what strike, and expiration were you trading. This info is important to provide you a decent answer.

for trading options, the most liquid options are at and slightly above the money. you mentioned that you trade with IB. Stick to best ex for options as it will preference exchanges that have electronic order routing turned on.

As for stop orders. Is it possible that you submitted the order incorrectly? Otherwise, it would have been a coincidence.
More...

I told you that I bought "OEBMP and SPTMJ " ... equates to a put on OEX at 580 & a put on SPX at 1150.

I also make sure to use IB's "best" order routing.... Additionally, my stop limit (loss) order was correctly entered... perhaps it was as you say, a coincidence....
 
Remember that the SPX and the OEX are only traded on the CBOE.

You may want to look at options on the ETFs instead like the QQQ, BBH, or SMH. These options are traded on all 5 option exchanges which will help in narrowing the bid-ask differential.
 
stocka,
it's been a long time since I traded the US options and thus I'm not familiar with all the symbols. I also don't have time to look things up so sorry about that. I can just say that the further away from the front month you get, the wider the spread can get. OEX auto ex will normally be on so that shouldn't be an issue. I doubt OEX supports stops and thus IB stops are not sent to the exchange before they are triggered. Thus it has to be a coincidence that the market traded on your trigger price - or an input error. If it happens again, i suggest you send the exact details of the trade to the help desk and they can track down exactly what occured via the audit trail.
 
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