I know for a fact, with my approach, the opportunity cost in the form of missed trades outweighs cost of filtering trades toward midpoint. Tried it years ago. You’re not the only retail trader with this brilliant idea. It’s a pay to play game, and you’re playing in someone else’s backyard. Don’t forget that.
Reaching midpoint
- Thread starter dennissr
- Start date
I know for a fact, with my approach, the opportunity cost in the form of missed trades outweighs cost of filtering trades toward midpoint. Tried it years ago. You’re not the only retail trader with this brilliant idea. It’s a pay to play game, and you’re playing in someone else’s backyard. Don’t forget that.
Your replies are like a work of art with all of the various Emogi colors.
Now as for that extra $23,400.00 , you should really take a pass on that because think of all of the extra taxes that you're going to have to shell out.
(_x_)
In all fairness, if it's a momentum play, say breaking news, then you have to pay to play in order to hop on quickly. If it's positional with a longer term time span, it may pay to work the order. It depends on the circumstances.
It depends on what you are trying to do. If you are looking at anything systematic where you are maintaining a portfolio of trades based on some rules, you want to look at profit over trade value (in whatever terms - ticks per contract traded, % over notional etc). If profit per contract is of the same order as the transaction costs, it's worth trying to figure out how to reduce your trade frequency (introduce some "flicker control" etc) or change your execution process. High freak guys have all sorts of more scientific methods to analyze this (they also tend to pay more of TCs), but for my games this approach is mostly sufficient.
There are strategies where I am, in general, a taker of liquidity and strategies where I find providing liquidity is an optimal approach. There are negative aspects to both, but it really depends on what exactly the game is.
The opposite
. Liquidity taker is the guy who "takes" an existing market to get into position, while the guy who is making the market is the provider of liquidity. You are supposed to get paid for providing liquidity, at least in theory. The provider of liquidity is short an option (cause he's willing to sell for a pre-set price) and the payment for that option is the bid/ask spread.
You had me at "opportunity cost" -- like the institutionals, if you've got to get it done, you've got to get it done.
There is no need for a binary "yes or no" approach. There are many degrees of aggression, from taking liquidity at the displayed levels, to showing an improved level though mid, working mid level or, finally, to actually be improving on the displayed market.
PS. I will venture that you are trading options in such a hurry that you would rather always take the displayed market, you would be better of trading the underlying
Got it. I thought it referred to working an order ie :buying on bidThe opposite
L
lovethetrade
Why over-complicate things? Taking liquidity out of the market means executing "at market" and providing liquidity to the market means submitting a resting order below the market when buying and above the market when selling.
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