Options order entry system - your preference?

[guru]

... on a side note, do exchange traded option spreads exist? Exchange traded futures spreads are great, so I'm wondering if they exist for options?

Options are often traded in multiple legs aka spreads, but if you mean options on different underlyings/instruments then I don't think so, although it's possible that exchanges are working on this or already have something I don't know about.
However, such orders are supported by Interactive Brokers, as their system allows creating virtual instruments that may consist of different options. In the past I tried to use that method to arbitrage options on multiple underlyings, but those orders never went through. I'm assuming IB would need to fill each leg separately and the system simply waits forever for the ask price on the whole combo to be below my bid. Though there are some software companies that specialize in order execution and may be able to fill complex orders with different legs through different exchanges, so some algo funds may be doing just that.

 

[Adam777]

Options are often traded in multiple legs aka spreads, but if you mean options on different underlyings/instruments then I don't think so, although it's possible that exchanges are working on this or already have something I don't know about.
However, such orders are supported by Interactive Brokers, as their system allows creating virtual instruments that may consist of different options. In the past I tried to use that method to arbitrage options on multiple underlyings, but those orders never went through. I'm assuming IB would need to fill each leg separately and the system simply waits forever for the ask price on the whole combo to be below my bid. Though there are some software companies that specialize in order execution and may be able to fill complex orders with different legs through different exchanges, so some algo funds may be doing just that.

I was referring to the same underlying, eg option flys trading through the exchange? Futures calendars (not options) are exchange traded through the CME, ICE etc so I need to look into this for options

 

[guru]

Then yeah, practically all option orders get traded and filled through exchanges, including spreads and flies. Brokers simply forward them to exchanges, unless some complex orders cannot be handled by exchanges, or the broker is trying to find the best route/exchange. You can see a bit of info at
https://business.nasdaq.com/trade/US-Options/PHLX-Complex-Orders.html

 

[Robert Morse]

... on a side note, do exchange traded option spreads exist? Exchange traded futures spreads are great, so I'm wondering if they exist for options?

Yes, there are 5 complex order books. They accept orders as spreads where you can't be legged out.

 

[Candledancer]

How do you implement and exit your trades? Lmt? At the ask to buy and bid to sell? Market? At the mid? At the mid and wait for it to fill? Or via a spread?

And on a side note, are spread-credit orders implemented as buy at ask and sell at the bid by default? Or do systems like IB constantly search for a mid fill between different options strikes? (if that makes sense).

Thanks

FWIW if you are trading at 100+ contract size you can contact the trading desk at IB who will work between the bid and ask without showing your showing your size directly to the market. There is a slight upcharge over doing it yourself but useful if you are trying to exit a trade going against you and having the bid and ask playing games with you.

 

[Abundance Magnet]

FWIW if you are trading at 100+ contract size you can contact the trading desk at IB who will work between the bid and ask without showing your showing your size directly to the market. There is a slight upcharge over doing it yourself but useful if you are trying to exit a trade going against you and having the bid and ask playing games with you.

Nice. Good to know. Not at that size yet but this is good info for the future.

 

[Mnewton]

With TDameri and thinkorswim i set up a spread at the minimum limit shown on ''mark' (price between bid/ask) and place the limit trade. If it gets picked up by the ecn at that price then great if not i adjust the price a couple of pennies and replace the trade. At some point the spread trade will go through and you will see the buy at a price and the sell at a price, the difference obviously at your limit placement. It's all done by computer i don't think on most stocks the mm could keep up. So you basically need to walk up the limit until you get hit.

 

[Abundance Magnet]

With TDameri and thinkorswim i set up a spread at the minimum limit shown on ''mark' (price between bid/ask) and place the limit trade. If it gets picked up by the ecn at that price then great if not i adjust the price a couple of pennies and replace the trade. At some point the spread trade will go through and you will see the buy at a price and the sell at a price, the difference obviously at your limit placement. It's all done by computer i don't think on most stocks the mm could keep up. So you basically need to walk up the limit until you get hit.

How is this different from separate legs? It seems like a lmt order on each side...

 

[Mnewton]

It's just all or none, you get both at the same time. You have to be covered to do the sell, so i guess you could put on the buy first and then try for the sell.

 

[ironchef]

How is this different from separate legs? It seems like a lmt order on each side...

Used to do that but for thinly traded options, separate leg trading can be risky, sometimes there maybe no taker for one of the legs. So now I only trade in combination. By the way I only trade pairs when I want to roll and usually that means I am in trouble and need to do something quick. I think you also get a slight commission discount for combined?