Seeking Advice on Filling Condor Orders

[Autry]

Hi All-

New trader here. I've been at it only a few months and I'm venturing into Iron Condors. My biggest issue is that I can't seem to get my orders filled. I've placed orders for around 15 condors over the last few days, and only two have filled.

I've adjusted my approach to make sure all legs of the condor have volume, but still not getting much traction. Does anyone have any suggestions?

Am I going to have just as much trouble exiting the trade if I want to exit before expiration?

 

[tommcginnis]

I've placed orders for around 15 condors over the last few days, and only two have filled.

Whoa! Wayyyyyy too many. What's your hurry, Buckaroo? Ease up!!! If the market starts to assail your positions, you're going to end up totally deer-in-the-headlights, with no plan, no clue, no hope, and then, no account. Keep those two ICs you placed, and wait until you've gotten your nose bloodied a bit and come through 'just fine' or better, before you go cranking volume.

Second, how/where were they filled/targeted? You've not told us anything about a) what you're trading, b) how far out in time c) how far away are your short positions d) how far apart are your legs, or e) whether your individual legs are on major strikes (which get major love) or unknown strikes that might get a quarter of the expected daily volume for that area. Is your IC's delta balanced? Biased high or low? We don't know.....

I've adjusted my approach to make sure all legs of the condor have volume, but still not getting much traction. Does anyone have any suggestions?

Am I going to have just as much trouble exiting the trade if I want to exit before expiration?

In general, vertical spreads will get better pricing than individual legs. But as far as ICs go, I always put up the vertical legs first, I enter something 1-tick inside the offer (to get everyone's attention -- this might cut the BID-ASK spread in half instantaneously), then I compare their joint price to the IC market, and work things from there. Sometimes (SPX or the 24-hr ES) I get better pricing on the verticals -- especially a thin (or far-off) market that has volume so poor you've got to entice them out of the corners to play. And sometimes, I get an immediate "Plunk!" on the IC -- and at a better price than I might've gotten for the individual legs. (Less common, that. But it makes me smile when it happens. )

On occasion, I've given up, and written 1 side (in the direction of a market move), expecting a change of direction the next day or two. Especially in times of shitty VIX, flexibility here means you're not so trapped by a 10-12 VIX through Wednesday evening, only to find a 14 VIX come Thursday morning...

One thing to note: a commonly played-up trait of the ICs is that as value increases on one side, it will symmetrically decrease on the other, and so the only net on the IC's value over time, is time itself, ticking slowly, slowly away. IN FACT, the curvilinear nature of options valuation means that, with a big shift of the market (up or down -- doesn't matter), the effect on the top side will be different than the effect on the bottom side, and this will affect the value of the IC (i.e., its profitability ) to an increasing degree, as expiration approaches. BE AWARE.

 

[beerntrading]

orders for around 15 condors

Yeah, for real, slow down. Remember...you're making a thread about how hard they are to get in to. When you're over a barrel trying to get out with ITM and deep OTM legs, it's going to be even more difficult to find liquidity.

 

[Autry]

Thank you for the replies fellas! @beerntrading @tommcginnis

lol- without context I guess it looks like I'm all in. To add some context, the 15 orders are the same 5 positions I've placed a few times. Total $ at risk is ~1% of overall portfolio. Definitely testing the waters here.

More context:
(1) I'm trading EWW, QQQ, VIX, SPY, EWZ
(2) inner strikes at 84% probability (1 SD I think? still learning) outer strikes just one contract outside the inner strikes (I think I've seen these referred to as "chicken condors")
(4) Contracts per underlying order range from 3 contracts (12 across all legs) to 9 contracts (36 across all legs)
(3) Trading on Robinhood
(4) With Robinhood, I have to place the whole trade at once. (a) Robinhood only allows defined risk options trading, (b) to group the legs together as one trade, they have to be on the same order (maybe Robinhood is a crummy options platform..)

@tommcginnis , lots of nuggets of insight in your post. Shows me I have a lot to learn and I came to the right place.

 

[Autry]

To both of your points, liquidity at entry worries me for liquidity at exit... is this a common issue that investors overcome with experience, of just something to get used to trading IC's?

 

[tommcginnis]

To both of your points, liquidity at entry worries me for liquidity at exit... is this a common issue that investors overcome with experience, of just something to get used to trading IC's?

Yes.

 

[beerntrading]

To both of your points, liquidity at entry worries me for liquidity at exit... is this a common issue that investors overcome with experience, of just something to get used to trading IC's?

I second the "yes".

But options being ITM (or far OTM) will lessen liquidity--if an IC goes against you, you'll have both working against you.
Spreads decrease liquidity because your counter party must take the same whole position (as opposed to partially filling someone's position on single-leg). And each additional leg decreases liquidity (as Tom said, you may well get filled easier on each side of the spread).
And the market conditions that lead to you IC going wrong tend to be accompanied by reduced liquidity (fast markets).

So, ICs kinda hit all of the above in the worst way.

But the more you trade, the more you'll understand how all this works. (like, for example, only closing the losing side spread when you can't get you of the whole thing).

But alas, the problem with spreads is you're always at the mercy of a counter party matching your order, rather than disappearing anonymously into order flow.

 

[Autry]

Thanks for the responses. Totally answered my question. I thought each contract could go to unrelated counterparties, but they just have to transact at the same time...

If the whole IC has to go to one counterparty, that explains a lot Re: liquidity risk.

Thanks again.

 

[Autry]

@tommcginnis @beerntrading , what are your thoughts on entering/exiting each leg individually to avoid the liquidity risk? Are there other risks that come out of that that I'm not considering?

Moot point, considering Robinhood doesn't let you trade any naked options... but I'm curious about your thoughts anyway. I could always shift to a new platform.

 

[beerntrading]

Thanks for the responses. Totally answered my question. I thought each contract could go to unrelated counterparties, but they just have to transact at the same time...

Oh, I don't think this is always strictly true. Some brokers offer the options to sweep the market (in IB, you check the "sweep to fill" option in the order window). I presume this would work allow ICs to be filled on separate exchanges, but only as marketable orders against shown liquidity (won't fill with hidden liquidity). I actually exploit this sometimes if I see a spread resting and know I can "complete the circuit" by filling one leg and letting the other get hit (My counter party then get a vexing partial fill). Speaking of discrete risks of trading spreads...lol.

@tommcginnis @beerntrading , what are your thoughts on entering/exiting each leg individually to avoid the liquidity risk? Are there other risks that come out of that that I'm not considering?

Your risks are, exactly, that of directional speculation.