IB allows bids at penny increments on options that trade at 5 ct increments on the exchanges. Also, spread orders are filled between the B/A without the quote going to that price (another party was doing the spread and your fill was part of it). I can't prove anything... I'm just suggesting that there are other possibilities for what you observed.
Options Commissions
- Thread starter Algo_Design_Kid
- Start date
I agree. If you NEED to execute because price is moving against you, you have to execute at market prices. But if you are working an order, better fills can add up to an awful lot over the course of a year. Obtaining a mere nickel on each side of a 10 contract spread once a week is 5 grand a year. Saving more than a nickel and/or doing size is a whole lot more. All I'm saying is blindly placing market orders for every position is not a good idea.
FWIW, regarding iron condors, I've seen component combos trade 10 or more cts cheaper one entry way versus another. IOW, market the market price for two verticals might be less than that of two strangles (or vice versa). So even just looking at a different combo would have saved a chunk over a blind market order.
Quote from learnnew:
Can you please explain in detail, Why we need to cancel the order even if stock drops, let the order get filled?
The answer will be apparent the day you get filled on both orders
Also, if for some reason I cancel the order, why IB charges the fees for cancellation, since it's not filled OR executed.
IB isn't "charging" you the fee. The cancel/modification fee is imposed by the option exchanges and IB is passing that to you.
rmorse
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Most option exchanges charge brokers for net cancellations generated from their firm, if the cancellations reach over a certain level per month. Because IB does not want to pay the fees themselves or decide which clients are creating the excess cancellations, they charge everyone.
The fees are charge because the excess orders create the need for more bandwidth at the exchange routes.
My experience at Ameritrade, confirmed by calling a rep: for each option series, they will route your order to a predetermined exchange. It may have the best price, it may not. It may execute your order anyway, or the order may just sit there, even if another exchange has a matching order at that price. I've personally generated locked or crossed markets with my orders at Ameritrade, when I placed a sell order at the best bid or lower, or a buy order at the best ask. That's right - sometimes my order to sell below the highest bid has not been filled because it has been routed to an exchange with an even lower bid that is apparently not willing or able to let the order go to another exchange. Sometimes in this situation my order would get executed a few seconds later, sometimes the market would remain locked or crossed until the bids/asks changed due to the underlying moving and my order became nonmarketable.
One broker I used would never route to BOX - wouldn't even show BOX on the level II display until a couple months after they opened . I traded thousands of SPY contracts, back when the tick size was .05 and the typical spread was .10, and never ever got price improvement. With brokers like IB, I did get price improvement, regularly. Only thing that kept me from moving totally to IB was the cancellation fees - I sometimes trade options with large bid/ask spreads and have to cancel/replace orders a lot.
Using a market order is asking for trouble! If you really want to get in/out then you should use a marketable limit order - i.e. if you are looking to buy an option, which is 1.90 offered then you should use a limit order with a 1.90 limit. This way you would get filled @ market without the risk of getting huge slippage.
Don't forget that a market order = execute at any price!
I don't know the mechanics of option exchange fees and what and when they are passed through to the broker. All I know is that IB provides a credit against them for trades executed and if I have more fills than cancels/modifies, I don't incur them. They list the algorithms at their web site but that's way more than I need to know
