Options Trading: Minimizing Friction Costs?

Thanks Robert. You are spot on about some things, such as me using options as a stock replacement. I don’t really think of myself as an options trader, though I do exclusively trade options. But I use them for the leverage they provide, as I look to capitalize in moves in the underlying.

So with that in mind a comprehensive analysis of possible outcomes using all the Greeks and spreadsheets, while theoretically best practice, is not particularly in my wheelhouse. I trade options, but I’m not an options trader. And my trades are generally headline driven, and I don’t do this full time, meaning comprehensive mathematical analysis isn’t always practical.

Thanks for all the tips guys. I think a 70 delta is about where I land most of the time with my slightly OTM options, and that is good advice to search for options actually being traded and not just MM. Any more tips are always welcome!
 
If you are going to trade in the less liquid names - try to bias toward multiply listed so you can cancel and replace on another venue. Sometimes it helps - sometimes it's an exercise of futility. You can't be primary on two or more venues - except by being the best price.
 
ktm said:
...but this market will not retain this pattern and behavior for much longer.
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Famous last words. The markets can keep doing this for years now. All bets are off, unfortunately, at this stage. It is a NWO, just not where we expected it.
 
"Please explain? I'm not aware of any rule that prohibits you from send limit orders to all 15 option exchanges."

Wasn't talking about the order - you can send orders to all 15 - of course if it traded15 liquidity wouldn't be as much of a concern.

The point I was making was if SIG is primary on the ISE variantions - they won't be primary on MIAX. They can however have hidden liquidity which might defacto make them primary for some customers on some places.

Sometimes just hitting a second place would benefit. With technology and hidden liquidity it might pay to cancel and move. Sometimes it works - other times not.

Some names are still single list - especially with "Smart" routers.
 
Overnight said:
Famous last words. The markets can keep doing this for years now. All bets are off, unfortunately, at this stage. It is a NWO, just not where we expected it.
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The SP was down 400 points so far this month. We're at 2400. What are we going to keep doing for years? By my math 6 more months and we're at zero.
 
ktm said:
The SP was down 400 points so far this month. We're at 2400. What are we going to keep doing for years? By my math 6 more months and we're at zero.
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That is probably what they thought in 1929. But it cannot ever reach zero, obviously. It can get darn near close to something akin to a bad price like zero, for all intent and purpose.
 
mushinseeker said:
tom.. are you talking about the differences between intermonth per strike, IOW chart the calendars? ie chart the vacillations between the iv's?
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Yes re calendars, although any set of differences is good to get a firm handle on both sides of the market. In screenshots I've posted here though, I've shown calendars (simple differences); 1,2,3,4-strike SPX spreads; paths of per-strike IV over time, etc.

But all of it brings into sharp focus what transpires one week to the next, and even if trading a 20 VIX environment is easier than a 10 or 15 VIX, volatility is that high because the market MOVES. :wtf: So, it's never a good day to not know your market best.
 
I always use smart routing on Interactive Broker. My default is set to the midpoint between the bid and ask. Usually I send my orders as limit orders at the midpoint. I absolutely HATE trying to save 5 or 10 cents and watching the market slip away from me, then paying 40 cents more. So I take the midpoint and call it a day.

Are you guys saying smart routing on IB isn’t all the smart, and I should be manually trying the different venues? And is coming in at the midpoint particularly weak?
 
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