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Options slippage
- Thread starter Maharaja
- Start date
Slippage, or wide bid/ask spreads?
The latter can be solved by combination orders--IB supports those, and some exchanges will quote certain combinations directly (mostly simple ones--verticals, strangles, but not butterflies in my experience). In general, you can get a fill somewhere between the bid/ask on combo orders if an exchange supports them.
The latter can be solved by combination orders--IB supports those, and some exchanges will quote certain combinations directly (mostly simple ones--verticals, strangles, but not butterflies in my experience). In general, you can get a fill somewhere between the bid/ask on combo orders if an exchange supports them.
Well, this is what I mean. Buy a calendar spread.
Stock is trading at 50
Sell 50 call quoted at B1 - A1 (Let (B1+A1)/2 = Ave1)
Buy 50 call quoted at B2 - A2 (Let (B2+A2)/2 = Ave2)
The purchase price at:
A2 - B1 would be the worst thing to do.
Ave2 - Ave1, is what I do usually because you would have a better order and a pretty good chance of getting a fill.
B2 - A1, has almost no chance of getting a fill, but would be the best base.
What I'm wondering is if "better" brokers can get a better fill somehow with these orders. How does the Ave2-Ave1 order go in? Do they only put in the order of one of your legs in such a way that if it does get filled then they can immediately execute the other leg of the order at the market to fulfill your price? In the example above if your price was Ave2 - Ave1, then the broker would have an order to buy at B2 and IF that was executed they would immediately sell at B1 for the other leg to come to an Ave2-Ave1 execution. Is this how it is done?
Stock is trading at 50
Sell 50 call quoted at B1 - A1 (Let (B1+A1)/2 = Ave1)
Buy 50 call quoted at B2 - A2 (Let (B2+A2)/2 = Ave2)
The purchase price at:
A2 - B1 would be the worst thing to do.
Ave2 - Ave1, is what I do usually because you would have a better order and a pretty good chance of getting a fill.
B2 - A1, has almost no chance of getting a fill, but would be the best base.
What I'm wondering is if "better" brokers can get a better fill somehow with these orders. How does the Ave2-Ave1 order go in? Do they only put in the order of one of your legs in such a way that if it does get filled then they can immediately execute the other leg of the order at the market to fulfill your price? In the example above if your price was Ave2 - Ave1, then the broker would have an order to buy at B2 and IF that was executed they would immediately sell at B1 for the other leg to come to an Ave2-Ave1 execution. Is this how it is done?
IB will do both depending on what the exchange allows.
If the exchange allows native calendars (which I believe CBOE and ISE do, but I'm not certain), they will actually put the order in as the calendar which could have a better bid/ask spread. The nice part of this is that your bid/ask actually shows as the inside bid/ask to other market participants.
IB will also attempt to buy individual legs at good prices to put together the calendar at the price you wanted.
I've had pretty good luck with both methods at IB.
If the exchange allows native calendars (which I believe CBOE and ISE do, but I'm not certain), they will actually put the order in as the calendar which could have a better bid/ask spread. The nice part of this is that your bid/ask actually shows as the inside bid/ask to other market participants.
IB will also attempt to buy individual legs at good prices to put together the calendar at the price you wanted.
I've had pretty good luck with both methods at IB.
I see. I use IB too, but I'm just trying to get a better understanding of how it all works...
Now in the method where they execute the individual legs in attempt to get a better calendar, they obviously won't take the risk of not getting filled into thier own hands right? They won't risk being "legged out". So isn't it better in that case to try and "quickly leg" into the order yourself? Continuing with the example I had, it would be better to execute one side at Ave1 and as soon as that gets filled, to execute the other side at Ave2. Of course if about 30 seconds passes and you don't get filled, you raise your Ave2 price until it does so that you aren't taking on too much risk with only one leg. This would give you quicker fills than if IB had to wait on a fill for the B1 or A2 side of an order. And of course, this gets really complicated if you have more legs with various ratios etc... But it some cases I am thinking it might be worth the risk to attempt to leg into combos...
IB is pretty good, I'm just looking at how to get even better fills.
Now in the method where they execute the individual legs in attempt to get a better calendar, they obviously won't take the risk of not getting filled into thier own hands right? They won't risk being "legged out". So isn't it better in that case to try and "quickly leg" into the order yourself? Continuing with the example I had, it would be better to execute one side at Ave1 and as soon as that gets filled, to execute the other side at Ave2. Of course if about 30 seconds passes and you don't get filled, you raise your Ave2 price until it does so that you aren't taking on too much risk with only one leg. This would give you quicker fills than if IB had to wait on a fill for the B1 or A2 side of an order. And of course, this gets really complicated if you have more legs with various ratios etc... But it some cases I am thinking it might be worth the risk to attempt to leg into combos...
IB is pretty good, I'm just looking at how to get even better fills.
This is very interesting. As a rule, I always get in and out the position as soon as possible, which means paying premium on ask and bid spread.
I do have questions about this 'aggressive' trade. By your experience, what's the chance of a fill with spread of Ave2 - Ave1?
a) Always
b) Most time
c) Sometimes
d) Rare
e) Never
When the spread gets executed, how long has it taken usually?
a) Immediately (less than 30 seconds)
b) Soon (less than 30 minutes)
c) Until the price of the underlying moves favoring the spread
d) Hours
e) Days
Appreciate you any input.
> Well, this is what I mean. Buy a calendar spread.
>
> Stock is trading at 50
>
> Sell 50 call quoted at B1 - A1 (Let (B1+A1)/2 = Ave1)
> Buy 50 call quoted at B2 - A2 (Let (B2+A2)/2 = Ave2)
>
> The purchase price at:
> A2 - B1 would be the worst thing to do.
> Ave2 - Ave1, is what I do usually because you would have a
> better order and a pretty good chance of getting a fill.
> B2 - A1, has almost no chance of getting a fill, but would be
> the best base.
>
> What I'm wondering is if "better" brokers can get a better fill
> somehow with these orders. How does the Ave2-Ave1 order
> go in? Do they only put in the order of one of your legs in
> such a way that if it does get filled then they can immediately
> execute the other leg of the order at the market to fulfill your
> price? In the example above if your price was Ave2 - Ave1,
> then the broker would have an order to buy at B2 and IF that
> was executed they would immediately sell at B1 for the other
> leg to come to an Ave2-Ave1 execution. Is this how it is done
I do have questions about this 'aggressive' trade. By your experience, what's the chance of a fill with spread of Ave2 - Ave1?
a) Always
b) Most time
c) Sometimes
d) Rare
e) Never
When the spread gets executed, how long has it taken usually?
a) Immediately (less than 30 seconds)
b) Soon (less than 30 minutes)
c) Until the price of the underlying moves favoring the spread
d) Hours
e) Days
Appreciate you any input.
> Well, this is what I mean. Buy a calendar spread.
>
> Stock is trading at 50
>
> Sell 50 call quoted at B1 - A1 (Let (B1+A1)/2 = Ave1)
> Buy 50 call quoted at B2 - A2 (Let (B2+A2)/2 = Ave2)
>
> The purchase price at:
> A2 - B1 would be the worst thing to do.
> Ave2 - Ave1, is what I do usually because you would have a
> better order and a pretty good chance of getting a fill.
> B2 - A1, has almost no chance of getting a fill, but would be
> the best base.
>
> What I'm wondering is if "better" brokers can get a better fill
> somehow with these orders. How does the Ave2-Ave1 order
> go in? Do they only put in the order of one of your legs in
> such a way that if it does get filled then they can immediately
> execute the other leg of the order at the market to fulfill your
> price? In the example above if your price was Ave2 - Ave1,
> then the broker would have an order to buy at B2 and IF that
> was executed they would immediately sell at B1 for the other
> leg to come to an Ave2-Ave1 execution. Is this how it is done