Tastytrade has set my account to closing only

[arizonadreamer]

Then I should be asking you, "What's the craic?"! If you truly can arb, I would attempt this in reverse. (More risk, of course) If the quotes are accurate, then try to repeat this trade under basically the same criteria, only buy to open the spread at 88. If you can't close it, don't worry. Assignment will take care of it for you. No need to close. I would still try to call in or request that they call you. Always better to speak to a human . . . enjoy it while you can before AI goes wild!

 

[Cabin1111]

Outside observer here...Disclosure, I do own stock in Schwab. That has nothing to do with my thoughts.

I am one of those boring guys who reads the disclosures (options) fully.

Three red flags I have heard from you.

#1. Level two trading. Someone who is committed to level two trading must have years and years of active (live) trading of options. You may or may not have that.

#2. If I was Tastytrade, and I saw that someone placed only $100. into an account (doing level 2 trading), I would see BIG RED FLAGS EVERYWHERE!!

#3. You used the word margin in some form...Another big red flag.

You should read (I mean really read) every word and phrase of the options disclosure brochure you have received. It was written by many attorneys whose only job is to protect Tastytrade and not you!! You have only agreed to arbitrate and not to sue...Your choice.

Good luck on your journey...

PS I am guessing the "exit fee" to leave the broker is about $150...But, I'm sure you read that in the disclosure.

 

[Spaghetti Code]

Con1991, Can you confirm that you actually mean $10,000? The max risk on that spread is $10K, not $100. I keep seeing the multiplier not being included in your math.

 

[tradegoodstocks]

Oh dear. Seems you are a bit obsessed with a previous post I made, asking a very genuine question. Paper money on Thinkorswim allows you to open unlimited contracts. That's why I was inquiring about this. However, now that I am live, I don't expect to trade 1 million options contracts. And even with 5 contracts, my profit was still displaying $6,000, on a trade that I subsequently could not close. Is that ok with you?

Interactive Brokers for example has a very low (near zero), but positive margin requirement for box spreads and DITM vertical spreads. Therefore the position size is not unlimited. Makes sense to me, because there is a small risk as the value of the spread will fluctuate between now and expiration, due to small changes in risk-free rates.

 

[tradegoodstocks]

So this is what happened: You bought 5 15,800 Calls, sold 5 15,700 Calls as a spread order and received 99.95 or $9,995 * 5 for a total of a $49,975 credit. (Minus commissions). How many days to expiration? Then the mid price moved to 87.95 for a seeming profit of $1,200 or $1,200 * 5 = $6,000.

I suspect that the mid price was in error. How soon after you opened the trade did the mid price decrease to 87.95?
The NDX can be very strange. I have had orders to sell credit spreads for say .50 and have the mid later say 2.40 and still not fill. The "true value" was never really 2.40 but closer to .40 - .60. Still, it is interesting that you were set to closing only.

I suspect the mid price was accurate. I could have set a limit to open or close at the natural price, but that would have required more margin and resulted in less profit. The reason profit can be so high with NDX, whether ITM or not, is volatility. The price was fluctuating throughout the trading day, until expiry overnight. Since I was trading a 1 dte option here. Interactive Brokers also has some arbitrary rule whereby establishing a position cannot exceed your account equity multiplied by 30. So it seems that Charles Schwab, or what was formerly TD Ameritrade is a broker that does not interfere excessively with its clients trades, and allows them to trade whatever they wish within reason.

You make some good points there. Regarding the spread I was referring to, it most definitely was in profit, and the prices were correct. I have live data in my account, so therefore the mid price displayed was correct. I aim for mid price always. And by default, that is what most brokerage platforms, including Tastytrade, display. It is not a good look for them to restrict someone for seeking what is effectively an arbitrage trade, within a few days of live trading, for sure. They would still be making commission for every contract I buy and sell, so I seriously fail to see their argument about my trades being uneconomical. I shall await what happens next, but if they want my business then allowing me to trade deep ITM spreads, as I see fit, is a deal-breaker for me I'm afraid. I haven't spoken to a person either, only email correspondence. As I live in Ireland and have no means of contacting by phone.

I am not an expert in options trading so correct me if I'm wrong; but I think common sense of options valuation would dictate that this midprice of 87.95 can not possible be a fair price for a DITM credit spread. If a change in volatility made the price drop so much, then I think it was not DITM (kind of by definition). If on the other hand it was indeed DITM, then the fair value should be slightly below the size of the spread, because you should pay the risk-free rate on your credit between now and expiration. My understanding is that market makers sometimes adjust their quotes to market moves with a short delay (as long as the fair value is still within the bid/ask). Also, a customer order could have moved the midprice.

In summary, I think you should not assume that the midprice is either a fair price or a quote that you would get filled at. It's just that - the midprice. Not more and not less. You can assume to get a fill if you buy at the ask. Was 87.95 the ask?

Regardless of this, I have trouble understanding why the broker restricts your account. The broker or market makers are free to either fill your order or not fill it. Additionally, the broker is free to set house margining rules however they please, based on their perceived risk. What's the point of policing or micro-managing customer orders?

 

[rbigsby]

Hello all

The only trades I could get to execute were one NDX position and one SPX position, both 5 contracts each. Both of these had a maximum risk of $5 dollars per contract, so $25, since I was aiming for mid price, which was the full width of the spread. Still I couldn't get them to execute for 0, so next best thing was the lowest amount possible. Then, as profit was showing for both trades in my account, I went to close both positions. So I set a buy to close order for each, and they also would not fill. At one point, my NDX trade was in profit by $6,000!! I kept lowering my limit price, even to the cent, and still would not fill.

explain how that works that a 15700/15800 spread of $100 becomes worth $6000. that just doesn't make any sense at all.

is this what you did?

buy 15700 call
sell 15800 call
credit $100

then you noticed you could get out of the position for $6000 like this?
sell 15700 call for $6000
buy 15800 call for small amount negligible?

that's the only way something like that could happen. so answer this for me: what was the price of NDX at the time?

do you see the issue?

i'm not an expert...

 

[rbigsby]

Regardless of this, I have trouble understanding why the broker restricts your account. The broker or market makers are free to either fill your order or not fill it. Additionally, the broker is free to set house margining rules however they please, based on their perceived risk. What's the point of policing or micro-managing customer orders?

tastytrade was trying to tell him there's no reason for such a trade. since most likely it is a break even trade or small loss. and that is all there is to it.

that and the fact that he only put $100 in his account and wants to do credit/debit spreads. that's a red flag in and of itself which if you were a broker would you want someone selling options with only $100 in their account? probably not.

 

[tradegoodstocks]

tastytrade was trying to tell him there's no reason for such a trade. since most likely it is a break even trade or small loss. and that is all there is to it.

that and the fact that he only put $100 in his account and wants to do credit/debit spreads. that's a red flag in and of itself which if you were a broker would you want someone selling options with only $100 in their account? probably not.

It sounded like the broker restricted i.e. closed his account (although apparently they offered to re-open if he stays away from certain trades). This seems odd to me.
It sounded like the OP was trying to do arbitrage trades i.e. profit from mispricings, using standing limit orders in the limit order book, which should be his/her prerogative, and should actually be desirable by brokers and the market as it makes the market more efficient.
Like I said, nobody forces market makers or any other market participant to fill his limit orders.
Why shouldn't he place an order in a $100 account, if the margin requirement of his order is less than $100. That's the entire point of margin rules. His order was near risk-free for the broker as well as for himself. What is the point of micro-managing and policing individual customer orders.

 

[newwurldmn]

This thread is possibly the dumbest of the year and this is the year of Quanto and wxytrader.

here’s the explanation of the note: OP is placing trades that no one would take the other side of. Placing trades costs money in terms of cancelation fees, routing costs, etc. while most of these fees are small they are real and tasty trade is bearing them for an order no one would execute against.

second the only trade that is trading are the ones where the OP is essentially locking in a loss because the spread will
Almost certainly be worth the full value and the OP is selling it for less than that. Tasty trade isn’t going to allow him to piss away all his money this way only to have him come back and sue them for allowing him to do this.

OP thinks that he can sell spreads at riskless prices but the world has an obligation to trade at a stale mid price.

OP should take tasty trade for arbitration for failing their duty as a broker. They should have never given him options trading access to begin with.

 

[rbigsby]

This thread is possibly the dumbest of the year and this is the year of Quanto and wxytrader.

here’s the explanation of the note: OP is placing trades that no one would take the other side of. Placing trades costs money in terms of cancelation fees, routing costs, etc. while most of these fees are small they are real and tasty trade is bearing them for an order no one would execute against.

second the only trade that is trading are the ones where the OP is essentially locking in a loss because the spread will
Almost certainly be worth the full value and the OP is selling it for less than that. Tasty trade isn’t going to allow him to piss away all his money this way only to have him come back and sue them for allowing him to do this.

OP thinks that he can sell spreads at riskless prices but the world has an obligation to trade at a stale mid price.

OP should take tasty trade for arbitration for failing their duty as a broker. They should have never given him options trading access to begin with.

That sounds about right especially the part about how the spread is more than the initial credit which could make his acct go negative since he only deposited 100 bucks. Tom Sosnoff couldnt even buy a new cap to go on top of his head for $100 so what gives?