Order execution for lightly traded options...

C

Cabin111

I've traded covered calls for years...25+ years. Yeah, boring I know. I just do it for extra income. A few questions...General, don't roast me.

I know market makers come into play if/when I choose Schwab or Fidelity for routing (PFOF)...I get it.

Does the MM know if I have a day only or good till cancelled order?? Would it matter in their computer algorithms??

In lightly traded option (say less than 10 options per day on a single date/amount), do dark pools come into play??

Which stocks/options do dark pools avoid (not worth trading)?

Any good/correct information would be appreciated...Thanks.
 
Cabin111 said:
Does the MM know if I have a day only or good till cancelled order?? Would it matter in their computer algorithms??
More...
No. Generally speaking, your broker will place a DAY order everyday until you cancel it.

This stuff is complicated and not standardized. A few people who understand it on this forum (not me), haven’t posted in awhile.

Watch this for better understanding of the options order handling process

 
I did listen...Interesting.

I would have loved to have seen his eyes when he was talking about PFOF...It would have given a lot of insight.

I have to disagree with him about "every option has to go through an exchange". Yes, it matches and gets filled at the exchange. But, it does not mean (if you go though most brokers), that your price will appear on/in an open market (bid/ask)!!

The option gets held by the broker looking for the fill with MMs. They do not want to make it to the market (unless they have a fill with a MM), if they can avoid it. That is how they make their money (PFOF).

Again, Fidelity (and all brokers) talk about "price improvement", but their bread and butter is the deals with the MMs.

A Fidelity rep told me point blank, that Fidelity is holding my offer (it isn't a ticket...A ticket would mean it went to a market). If Fidelity has a match they will fill it. That is why I will go though CBOE, rather than a Fidelity route for options. And I believe this is where the SEC wants to get involved.

It sounds from this video they (MMs), will make a market in everything. With a boring stock it will not be much. In which case, you may want to look to a specific market and give up price improvement. With a large company (Apple/Amazon) it would be best to go through their routing system for price improvement...

Just my thoughts...
 
You must log in or register to reply here.
Back
Top