Option Market Order

E

ET180

I always use limit orders, but has anyone ever submitted a market order to sell for an option that is currently pretty far OTM for the next day? I should know this, but how is that market order executed when the options market opens the next day? What determines the price of execution? I think it would get executed against limit orders to buy, but if there is not a limit order to buy that can be matched against it, then would it simply take the first available limit order to buy that comes in at any price? My brokers is IB if that is relevant to answering the question.

I know I want to sell some options tomorrow, but I'm usually still asleep when the market opens and I think the market will move away from my order as the day progresses. So my best price will likely be near the open. What I have done in the past is wait for the option market to open, then submit a limit to sell one or two ticks higher than the bid. But would there be a disadvantage to doing that vs. simply submitting market order the night before? I'm asking about options on a very liquid underlying like SPY or XBI.
 
I don't recall selling at market price at the open, but I did get screwed quite a few times selling at limit price that I set much worse than a fair price I could've gotten. Usually I'd end up selling at my limit price, whatever it is, as long as its unfavorable. Not sure why would it work any better with market orders, but would be nice to know...
 
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Robert Morse explained it perfectly, generally you never put in market orders for the opening. As he said you will get the market price on the exchange that order is sent to. Depending on the exchange that market could be quite wide, far wider then a market on another exchange. If you wait just a few seconds after the open, you will get the benefit of seeing the market on all the exchanges.
 
Would something like the following work for your order?
Pre-determine time you wish to make the trade to after market is open. The reason to wait is to insure BID / ASK begins to settle in to normal trading ranges (to avoid the market opening trades). Set your limit price as an offset from the MARK, giving in for your comfort level of how bad you want the trade to fill. You should be able to place these conditional orders in advance so you don't have to be in front of the computer. The rub is, if your offset from MARK was too greedy, you will not get filled.
As always, place close attention to Robert's advice.
 
stepandfetchit said:
Would something like the following work for your order?
Pre-determine time you wish to make the trade to after market is open. The reason to wait is to insure BID / ASK begins to settle in to normal trading ranges (to avoid the market opening trades). Set your limit price as an offset from the MARK, giving in for your comfort level of how bad you want the trade to fill. You should be able to place these conditional orders in advance so you don't have to be in front of the computer. The rub is, if your offset from MARK was too greedy, you will not get filled.
As always, place close attention to Robert's advice.
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Agree, I'd have to code something up to do that. What I'm looking for is basically wait 30 seconds - 1 minute after market opens for bid-ask to narrow, then submit limit order at midprice. But if I have those conditions, then I might as well have other conditions such as only do the trade if the underlying is trading between some range.
 
If you have TOS, you could use an order like this, and place this conditional order in advance. The determination of the MARK will occur at time condition (time : 06:31 shown here) is triggered.
upload_2020-4-7_15-55-20.png
 
stepandfetchit said:
If you have TOS, you could use an order like this, and place this conditional order in advance. The determination of the MARK will occur at time condition (time : 06:31 shown here) is triggered.
View attachment 224322
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Thanks, that's actually exactly what I am looking for. I use IB and I don't think TWS supports order rules as sophisticated as that. I have submitted bracket orders before, but nothing time or price based. Does anyone who uses TWS know if I can submit a conditional rule such as what stepandfetchit has shown above?
 
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