Reaching midpoint

[sle]

if you are a retail trader then buy at ask and sell at bid

A retail customer (or any non-MM participant) is almost always best served by working an order. Yes, you are not guaranteed a fill (* but guess what, you are not even guaranteed it if you try to take liquidity) but you are improving the expected value of your execution. Someone might be interested on the other side of your order, its possible that an MM might get a trade that is a perfect offset and will fill you etc.

Couple random thoughts:
1. qxr1001 is rightly pointing out that execution should not be a crucial component of your strategy (unless you are a high frequency player), but transaction costs are almost always a big scrape on the total revenue. It's worth optimizing execution as much as you can without impacting your ability to capture alpha.
2. it's worth remembering that costs are certain, while risk and profit (more so) are not. This usually means that if transaction costs are a meaningful portion of your expected alpha, you might want to avoid trading entirely and look for better opportunities.

 

[spindr0]

When I submit near the midpoint I rarely get filled "soon".

I find that spreads tend to get filled at the midpoint faster than single legs... but I'm merely a finite sample

 

[tommcginnis]

This usually means that if transaction costs are a meaningful portion of your expected alpha, you might want to avoid trading entirely and look for better opportunities.

Back before vol fell into its current lull, I spent years doing far-OTM spreads -- generating return that by 2017 standards would be patently irresponsible (2%-3%/week). Transaction costs were a very sizeable chunk -- still would be now! Except we'd all be 30-50 SPX points closer, fercripsakes.
In 2017, 1%/week feels like .....

 

[spindr0]

assume that this is useless exercise and just forget about it. if you are a retail trader then buy at ask and sell at bid. if the mid-point will make it or break it for one then the one's trading method is useless. if the spread is too big then one trades the wrong instrument or the wrong time period

Apart from the patronizing tome of your reply, as tommcginnis said, thank you for your participation in trading the financial markets! Saving a nickel or a dime (or more) on 10-20-50 spreads can really add up and make a difference in ROI.

 

[tommcginnis]

Apart from the patronizing tome of your reply, as tommcginnis said, thank you for your participation in trading the financial markets! Saving a nickel or a dime (or more) on 10-20-50 spreads can really add up and make a difference in ROI.

(I can't tell you how often I've "What?!?! A nickel or a dime?!?!? Doesn't matter!!" ....... I throw fits. I rank such thoughts with the "educators" who teach "How To Make Great Stock Trades" when the only thing they do is how to enter, leaving the dull, boring, messy stuff like trade/position/portfolio/capital/risk management to "our more-experienced, special, high-asset value students.....Want to join our Platinum platform?!?" )

5¢*2 sides*100 = $10.00

times (just!) 10 spreads = $100.00

plus 1 roll away from market (buy-back + re-sell) = $200.00 + $100.00 = $300.00

times 1.5x (cuz half the time, it might happen to the other side, right??

$300.00 * 1.5x = $450.00

And hey, doing weekly(s)!!!

$450.00 * 52 = $23,400.00 for a nickel.

And as sle pointed out (or strongly implied, at least), this is dollars guaranteed -- a fair claim to alpha status -- which very few of our other {voluntary/choice} actions can claim.

 

[qxr1011]

Apart from the patronizing tome of your reply, as tommcginnis said, thank you for your participation in trading the financial markets! Saving a nickel or a dime (or more) on 10-20-50 spreads can really add up and make a difference in ROI.

he-he

you welcome guys

keep doing what you doing too

 

[qxr1011]

(I can't tell you how often I've "What?!?! A nickel or a dime?!?!? Doesn't matter!!" ....... I throw fits. I rank such thoughts with the "educators" who teach "How To Make Great Stock Trades" when the only thing they do is how to enter, leaving the dull, boring, messy stuff like trade/position/portfolio/capital/risk management to "our more-experienced, special, high-asset value students.....Want to join our Platinum platform?!?" )

5¢*2 sides*100 = $10.00

times (just!) 10 spreads = $100.00

plus 1 roll away from market (buy-back + re-sell) = $200.00 + $100.00 = $300.00

times 1.5x (cuz half the time, it might happen to the other side, right??

$300.00 * 1.5x = $450.00

And hey, doing weekly(s)!!!

$450.00 * 52 = $23,400.00 for a nickel.

And as sle pointed out (or strongly implied, at least), this is dollars guaranteed -- a fair claim to alpha status -- which very few of our other {voluntary/choice} actions can claim.

traders make or loose not on the fill but on the method

yes institutional bozos worked the order what else can they do.... it's they bread and butter cause they have no robust method... they counting pennies

 

[qxr1011]

retail customer (or any non-MM participant) is almost always best served by working an order

he is best served by concentrating on the method, by entering and exiting fast, at the signal prices,

all efforts of improving the execution price - just masturbation that takes away time and concentration

 

[tommcginnis]

qxr1011, you are wrong, and if you're making money right now, you *should*be* making lots more.
("Yayyyyyy!")

Compare the volume, and then the bid-ask spread, of SPX versus SPXWs.
SPXWs trade in the thousands, with spreads ~50¢.
SPXs trade in the tens-of-thousands, with spreads of >$1.00.

The SPXs are dominated by institutionals, whose market inelasticities demand quick action from them -- which translates to being price takers, and results in wide bid/ask spreads.

The SPXWs are populated by participants with much more elastic desires, and who, while perhaps still price-*takers*, are still having a(n) (execution) time budget and a strike (risk exposure) budget and calendar/expiry budget that provides them many more substitutes than that pesky, cludgy SPX market. ("Pfffft! Phooey!")

The institutionals do not give a rip about far-OTM/ITM trades -- they're positions are either worthless to them (if OTM) or are*far* dominated by delta (if ITM). That's DOLLARS versus pennies.

If selling options is "like picking up change in front of a steam roller" then it is the institutionals driving the steam roller, and us retail/semi-retail who're picking up the change.

So! "Free advice (being) worth what you paid for it," I'd advise you to examine your trading, and see what monies you're giving away with each trade, and get about putting those dollars back in your pocket. (Where they belong.)

 

[qxr1011]

qxr1011, you are wrong, and if you're making money right now, you *should*be* lots more.

i am right, period

what i am making and what i should be is not subject of this discussion