Terrible SPX and RUT bid/ask spreads but ES spreads better

V

vanv0029

Has anyone noticed that SPX option spreads have gotten much worse? Spreads
now even for options with volume seemingly of a few thousand will have a 1.00
to 1.20 bid/ask spread. Worse when an order is entered, the spread for the
order will jump 1.00 or more away from the bid. I have only been looking for
the last week or so. Is this now normal SPX and RUT behavior? If I leave an order
at the original bid or ask, it will often fill but take a few hours. Does anyone know
what is going on? I trade using IB.

Strangely, ES bid/ask spreads seem to have gotten much better. Almost always
.5 points ($25) with mid one tick from each. Also orders will fill at the mid.

It seems that rules governing market making have gotten worse on stock options
but better ES options. Is that true?
 
Look at something other than the 3rd week expiry, and you'll see much narrower spreads.

For a ~20-delta $5 spread, these are typical. These are SPX, but the ES are equivalent.

Capture.PNG
 
I apologize for the late posting of this, but the charts above were directed at a short-term horizon ('the next 6 expiries') while my usual *window* is to go out ~6 weeks. In looking at a more-standard (to me) sampling (below), it's evident that indeed, yesterday afternoon saw higher-than-normal bid-ask spreads in the SPX -- and I'll bet the ES, too. (FWIW, this sampling was performed within the same minute as the post above.)

"Normal" bid-ask for an SPX $5-wide spread is 40¢-50¢ or about 50%. Yesterday afternoon's 80%-100% string is surprising to me -- more what I'd expect when the market is cranking through a move, and one side of the market is de-populated, and the other side is trying to clear everything.


Capture2.PNG
 
The SPX monthly AM options are quoted differently then the weekly and pm options. They will have a wider quoted market, but generally the same "inside" market. So even if you see a 1 wide market, the "real" market is generally much tighter.

This will change soon, as the SPX monthly options will soon be quoted with multiple market makers, as the weekly are, and you should see much tighter markets on the screen.
 
FSU said:
The SPX monthly AM options are quoted differently then the weekly and pm options. They will have a wider quoted market, but generally the same "inside" market. So even if you see a 1 wide market, the "real" market is generally much tighter.

This will change soon, as the SPX monthly options will soon be quoted with multiple market makers, as the weekly are, and you should see much tighter markets on the screen.
More...

You can see that 'Overnight Risk' factor into the prices between the 'March15' and 'March16' in the first chart. That 'monthly expiration' correspondence is even more evident in the volume, as the March15 users are heavily institutional. So, that part will switch to the March16 expiry, even if the wider 3rd-week bid-ask-spreads don't follow.

At any event, 'Big Ol' Wide' bid-ask spreads yesterday. Today's (I just checked) were lower -- in the 50¢-60¢ range -- still higher than normal, though.
 
FSU said:
The SPX monthly AM options are quoted differently then the weekly and pm options. They will have a wider quoted market, but generally the same "inside" market. So even if you see a 1 wide market, the "real" market is generally much tighter.

This will change soon, as the SPX monthly options will soon be quoted with multiple market makers, as the weekly are, and you should see much tighter markets on the screen.
More...

When is this happening?
 
Cdntrader said:
So did they get tighter?
More...

Yes, quoted markets are now much tighter. The down side is customers no longer have priority in the SPX monthly. Trades are now based on size quoted on a pro rata basis. So if you change the market as a customer for a 1 lot and the mm joins you on a 50 lot, you are out of luck.
 
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