options - open interest volume and pricing impact

[Robert Morse]

"cabinet" orders where used in the past when options traded in fractions. Only specialist and MM knew they were there as they were not displayed and you still needed someone to buy the option at $0.01 from you. Now that options trade in $0.01 and $0.05 increments, I'm not sure that is an options. As GE options trade in $0.01 increments, that is the value of a cabinet order.

 

[elt894]

I could not give away my long GE OTM calls. I called broker and asked if I could sell them for $0.0 so I could take tax losses this year and the answer was a resounding NO, not allowed by exchange rules.

You could sell it as part of a spread and then close/exercise the other leg (so you don't run into wash sale rules).

If you can give your broker an irrevocable instruction not to exercise, you could treat it as abandoned.

 

[Abundance Magnet]

The midpoint is not always "fair value" to a market maker and each market maker has their own skew. And, you might have caught a customer order. This is why all option orders need to be "worked" to find liquidity up to your limit. You need a process to find your limit but be mindful that the midpoint can move without any change in real value for the options at all with small customer orders. That does not mean the options is worth more or less because one side got tighter. Just the midpoint moved.

thanks for this. Very helpful. It reminded me that I'm not always trading against a singular entity. In the past, I would stop inching up my price because I didn't want to get string-ed along (price baiting), but really, it is about what i'm willing to buy/sell the security at. If there are numerous MMs out there competing for the biz, then it is best if I just aim for my best price.

another Q... for SPX are there multiple MM out there? the exchange is always XCBO on my system (CBOE exchange i'm assuming).

 

[ironchef]

Actually it's called a cabinet trade and although not common is allowed. Especially in a multilist like GE. Next time have your broker try another exchange.

https://www.investopedia.com/study-...rket-place/cabinet-trade-accommodation-trade/

He did, but still no takers.

 

[ironchef]

You could sell it as part of a spread and then close/exercise the other leg (so you don't run into wash sale rules).

Great idea. Thanks for the suggestion.

 

[Abundance Magnet]

LVX-Not sure if this is last sale, bid or ask or mid-point.

View attachment 195172

this is promising... can you show one of an spx leap? i.e. something that is less liquid. i'd like to see if it just showing the traded Hi-Lo, or if it is the bid ask of the option for the entire day. Ideally, over the last 5 days...

thanks!

 

[ironchef]

You could sell it as part of a spread and then close/exercise the other leg (so you don't run into wash sale rules).

Costed me a little money but was able to get out and booked 2018 loss on my GE (now DOTM) call options. I actually converted into a diagonal spread with Dec expiration on one leg (in case I wanted to keep and play that leg).

Thank you for the suggestion.

 

[TommyR]

i heard lit/dark sweep and hide not slide orders can be useful for optimizing execution. do you find exchanges will also make you your own order type if you are nice to them?