Partial-filled Straddle Order

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elitetradesman

Because a straddle involves two separate orders, one for puts and the othere for calls, it's quite possible that only one of them gets filled and that can change the entire picture unless the other gets filled. :( How do you deal with partial fills?

Let's say you want to sell two puts and two calls.

Case 1: You got a fill on the puts, but didn't on the calls. Now you are short two naked puts.
Case 2: You got a fill on the puts, but you only got a partial fill on the calls. Now you are short a straddle, which is one contract, and one naked put.

Do you adjust the unfilled order so that it is executed as soon as possible? In this example, it would be moving the limit price closer to the bid. If I'm right, most brokerages charge for adjusting your option orders, so you don't want to adjust the price too often. Does anyone have a more graceful solution for this?

Thanks!
 
combo order, don't sell them as individual legs unless you are legging on purpose for better pricing. if it's some illiquid stuff, well, good luck. if it's ATM straddle, shouldnt have a prob with combo order. TOS and IB support combo orders, if you are trading somewhere else...where?
 
Quote from elitetradesman:

Because a straddle involves two separate orders, one for puts and the othere for calls, it's quite possible that only one of them gets filled and that can change the entire picture unless the other gets filled. :( How do you deal with partial fills?

Let's say you want to sell two puts and two calls.

Case 1: You got a fill on the puts, but didn't on the calls. Now you are short two naked puts.
Case 2: You got a fill on the puts, but you only got a partial fill on the calls. Now you are short a straddle, which is one contract, and one naked put.

Do you adjust the unfilled order so that it is executed as soon as possible? In this example, it would be moving the limit price closer to the bid. If I'm right, most brokerages charge for adjusting your option orders, so you don't want to adjust the price too often. Does anyone have a more graceful solution for this?

Thanks!
More...

The order should be entered as a two leg order. In this case entered as a limit net credit. This will not guarantee that you will get the full order filled, but it will guarantee that you will be filled on both sides. Or entered as a market order. This may result in a unfavorable fill. One could enter the order as a "AON" All Or None, but this may disadvantage you as well, most often in no fill at all.

As for being naked, in this strategy you are technically naked on both sides.
Yes.. All the brokerages I know will treat an adjusted partial fill order as a new order for commissions.
 
Thank you, Kedwards and stoic.

I'm using IB and just placed a combination order in my paper account, with one contract in each leg. They charged $2 for commissions, $1 for each leg. Their web site says the commission is $0.75 per contract. Does that mean a combination order is still considered multiple orders for commission purposes, even though they are executed together?
 
Quote from elitetradesman:

Are you serious? I thought you could get ripped off big time with market orders in options trading?
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I use MARKET orders all the time with IB.
 
Quote from elitetradesman:

I'm using IB and just placed a combination order in my paper account, with one contract in each leg. They charged $2 for commissions, $1 for each leg. Their web site says the commission is $0.75 per contract. Does that mean a combination order is still considered multiple orders for commission purposes, even though they are executed together?
More...
What's hanging you up is the minimum ticket of $1 per transaction (a straddle involves 2 transactions).

If your straddle order had been for 2 contacts on either side, the commish would have been $1.50 per position for a total of $3
 
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