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Timing / leg-in a multi-leg trade = bad?
- Thread starter a529612
- Start date
Often a one leg trade gets adjusted and becomes a multileg one. Or you could start off with the goal of getting a fly and leg into that in bits and pieces, say the debit spread followed by the credit or whatever, and turn it from a negative expectancy trade into a positive expectancy trade - assuming your legging is done at better prices than if you opened the whole fly all at once.
daddy's boy
daddy's boy
WallStGolfer31
Guest
Just enter it as a (multi-legged) spread order, can't you do that?
If the intention is to end up in a spread as distinct from building a position over time then in general I agree with the initial responder.
If you are good enough to time the direction to leg in to a less than fair value spread then there may be better ways of leveraging your skills.
If you want to take advantage of different prices for legs at different exchanges then legging in over a very small time period (seconds) may be advantageous. [EDIT: If your broker doesn't already route to best exchange per leg]
Depending on your trading platform and other factors this can be done with minimal risk.
As long as you are aware of the risks of not completing the spread as intended then try it out a few times and you will come to your own conclusion as to the likely efficacy of the "legging" approach over the long term.
MoMoney.
If you are good enough to time the direction to leg in to a less than fair value spread then there may be better ways of leveraging your skills.
If you want to take advantage of different prices for legs at different exchanges then legging in over a very small time period (seconds) may be advantageous. [EDIT: If your broker doesn't already route to best exchange per leg]
Depending on your trading platform and other factors this can be done with minimal risk.
As long as you are aware of the risks of not completing the spread as intended then try it out a few times and you will come to your own conclusion as to the likely efficacy of the "legging" approach over the long term.
MoMoney.
Quote from a529612:
For a multi-leg trade like spread, etc., should you always do everything simultaneously or it's OK to time each trade to get the best possible price?
General wisdom that I have learned a long time ago at Bankers Trust (with respect to both options and any other spreads) goes as follows
Legging the spread is like spreading the legs - you might get f#cked
This said, you might not have a choice (i.e. if the MMs are trying to pull a quick one on you or quoting you a really wide market). In that case you should do the long-gamma leg first.
Legging the spread is like spreading the legs - you might get f#cked
This said, you might not have a choice (i.e. if the MMs are trying to pull a quick one on you or quoting you a really wide market). In that case you should do the long-gamma leg first.
Dear sle,
SLE wrote: "This said, you might not have a choice (i.e. if the MMs are trying to pull a quick one on you or quoting you a really wide market). In that case you should do the long-gamma leg first."
How come you recommend doing the long gamma leg first - I would have thought the short gamma should be closed first. Or are you referring to opening a spread?
Cheers
daddy's little boy
SLE wrote: "This said, you might not have a choice (i.e. if the MMs are trying to pull a quick one on you or quoting you a really wide market). In that case you should do the long-gamma leg first."
How come you recommend doing the long gamma leg first - I would have thought the short gamma should be closed first. Or are you referring to opening a spread?
Cheers
daddy's little boy
Quote from daddy'sboy:
Dear sle,
SLE wrote: "This said, you might not have a choice (i.e. if the MMs are trying to pull a quick one on you or quoting you a really wide market). In that case you should do the long-gamma leg first."
How come you recommend doing the long gamma leg first - I would have thought the short gamma should be closed first. Or are you referring to opening a spread?
Cheers
daddy's little boy
If you are asking what I think you are asking, then - when legging into a spread (opening the position), you should get into the long gamma leg first. This will limit your exposure in case the market moves against you while you waiting for the other side of the spread to come in at your price.