Options Trading Is Rigged Against Average Investors; Payment for order flow allows brokerages and b

[Sergio123]

i agree selling orderflow to market making firms should be not be allowed if they are allowed it should be payment to the actual customer. you can see that 1 contract has the ability when to suddenly shift the bid/ask or hold price off unless of course prices is going against your order for a peroid of time.

The market makers are providing a service of order fulfillment and lower commissions and fees for thier customers.

If your problem is stop loss hunting then why don't you change your stop loss levels to something that can handle the normal trading whipsaws?

You need to do your own research for finding the security that trades at the price and the volatility levels that suit your needs and do the proper position sizing and risk management.

 

[caacapital]

The market makers are providing a service of order fulfillment and lower commissions and fees for thier customers.

If your problem is stop loss hunting then why don't you change your stop loss levels to something that can handle the normal trading whipsaws?

You need to do your own research for finding the security that trades at the price and the volatility levels that suit your needs and do the proper position sizing and risk management.

Im referring to paying for orderflow so they can front run your order.

 

[destriero]

Im referring to paying for orderflow so they can front run your order.

It literally doesn't happen. They are operating on the premise that you're r*tarded.

 

[TheDawn]

I understand the concern and how it looks. IMO, reality is a little different. The place you put your stop to sell might be a new low, a break down price, a price below heavy volume, etc....When a few thousand day traders place stops on or about the same price, you can't blame a MM's system from seeing a large number of sell orders and dropping their bids to scale down. Then the selling stops and buyers have a chance to move back in. This happens in many asset classes including futures, where no one can see the Stop orders. As much as I'd like to blame someone, the blame is always the responsibility of the trader. He or She gets the credit for the good and the bad.

So I guess a possible "countermeasure" to this is if we place hidden orders? Would MM's who pay for order flows still see hidden orders? Would you know? Of course the downside to hidden orders is that they might not get executed so if they are not as effective as far as cutting losses is concerned.

 

[Robert Morse]

Most Option orders are sent to a designated Market maker (DMM). They decide if they want to trade with you, post the order and what option exchange to place it on or print it. If you have the choice to choose an option exchange, those orders are still typically sent to an DMM. Placing hidden orders in options is not something I would do. An Iceberg order maybe, for very large orders, in less liquid symbols. If these are liquid symbols, many MM want to trade size as long as they have "edge". They would rather do 2000 than 2.

So I guess a possible "countermeasure" to this is if we place hidden orders? Would MM's who pay for order flows still see hidden orders? Would you know? Of course the downside to hidden orders is that they might not get executed so if they are not as effective as far as cutting losses is concerned.

 

[TheDawn]

Most Option orders are sent to a designated Market maker (DMM). They decide if they want to trade with you, post the order and what option exchange to place it on or print it. If you have the choice to choose an option exchange, those orders are still typically sent to an DMM. Placing hidden orders in options is not something I would do. An Iceberg order maybe, for very large orders, in less liquid symbols. If these are liquid symbols, many MM want to trade size as long as they have "edge". They would rather do 2000 than 2.

What I mean by hidden orders is more for trading stocks and other assets. I know hidden orders don't help much in terms executions for options.

 

[Robert Morse]

If I wanted to hide my order, I would rather use a DARK pool. I have customers trading low volume symbols that prefer Dark pools and high volume larger accounts that prefer Dark pools to getting in and out of larger orders. I have no opinion on when DARK is better. I would not hide equity orders on Lite ECN/Exchanges. Our customers sending limit orders to add liquidity do not get paid on ARCA or NASDAQ for adding liquidity. You miss out on a credit of $0.002/Share.

What I mean by hidden orders is more for trading stocks and other assets. I know hidden orders don't help much in terms executions for options.

 

[TheDawn]

If I wanted to hide my order, I would rather use a DARK pool. I have customers trading low volume symbols that prefer Dark pools and high volume larger accounts that prefer Dark pools to getting in and out of larger orders. I have no opinion on when DARK is better. I would not hide equity orders on Lite ECN/Exchanges. Our customers sending limit orders to add liquidity do not get paid on ARCA or NASDAQ for adding liquidity. You miss out on a credit of $0.002/Share.

But at least they won't see your stops? This is one of the concerns that were raised in that MM's are able to deduce possible stops and tp targets to their advantage when they see orders on the books especially when they pay for orderflow. Since dark pools are not accessible to the investing public according to this article: https://www.investopedia.com/articles/markets/050614/introduction-dark-pools.asp, then the only way for retail traders to not get stop-hunted or shaken out of their positions is really through hidden orders.

 

[Robert Morse]

Our customers can access dark pools but dark pools do not take stop orders and a stop order is not hidden after triggered. You can’t combine these all.

But at least they won't see your stops? This is one of the concerns that were raised in that MM's are able to deduce possible stops and tp targets to their advantage when they see orders on the books especially when they pay for orderflow. Since dark pools are not accessible to the investing public according to this article: https://www.investopedia.com/articles/markets/050614/introduction-dark-pools.asp, then the only way for retail traders to not get stop-hunted or shaken out of their positions is really through hidden orders.

 

[Ironplates]

could good market structure and trade location be good enough for your entry?