Unusual large spread

F

Fonz

Depending on market conditions, I day trade SPX simple call and put options, on the last trading day.
Since yesterday, I noticed huge spreads from time to time. So yesterday, I was thinking that is just because of a Fed day. I don't use option on Fed day.
Also when IV of the SPX and the VIX spike, it is not unusual. Not the case today.

Today, I see exactly the same huge spreads, specially with 2430 and 2420 puts that I follow this morning (June 16):
At 11:22 ( I try to get out)
2430 = 4.50 / 6 for 2 sec, then 4.40 / 6.20 for a min
2420 = 0.85 / 1.10 for 5 sec, then 0.95 / 1.15 for a min

At 11:26
2430 = 5.20 / 5.50 much better
2420 = 1 / 1.15 not great, out at 1.05

Does anyone know why? Fed day was obviously yesterday.
My broker is IB.
 
Fonz said:
Depending on market conditions, I day trade SPX simple call and put options, on the last trading day.
Since yesterday, I noticed huge spreads from time to time. So yesterday, I was thinking that is just because of a Fed day. I don't use option on Fed day.
Also when IV of the SPX and the VIX spike, it is not unusual. Not the case today.

Today, I see exactly the same huge spreads, specially with 2430 and 2420 puts that I follow this morning (June 16):
At 11:22 ( I try to get out)
2430 = 4.50 / 6 for 2 sec, then 4.40 / 6.20 for a min
2420 = 0.85 / 1.10 for 5 sec, then 0.95 / 1.15 for a min

At 11:26
2430 = 5.20 / 5.50 much better
2420 = 1 / 1.15 not great, out at 1.05

Does anyone know why? Fed day was obviously yesterday.
My broker is IB.
More...
It is x DVD on SPY and I believe triple witching, may be a partial factor. Sure others will chime in
 
For the SPXW, check out the bid volume against the ask volume -- the tale is generally told right there. As well, for ATM/ITM, you're watching options that have little use == little demand. (Would *you* buy one, on the day of expiration?)

For the SPX, bid-ask spreads will always be 2x-5x wider, no matter the volume traded is as high as 10x the SPXWs.
 
tommcginnis said:
For the SPXW, check out the bid volume against the ask volume -- the tale is generally told right there. As well, for ATM/ITM, you're watching options that have little use == little demand. (Would *you* buy one, on the day of expiration?)

For the SPX, bid-ask spreads will always be 2x-5x wider, no matter the volume traded is as high as 10x the SPXWs.
More...

You will not find more trading volume on SPX weeklies (instead of open interests) the last trading day, specially in the morning.
Expiration June 16th is a weekly.
 
Fonz said:
I will definitely look at the dividend impact on the SPY.
Thanks!
More...

SPY going ex-dividend is yesterday's event risk. Traders have already flattened those positions by yesterday's close.

I had an iron butterfly position on SPY expiring today. I closed the put vertical spread half yesterday at the close because they were deep in the money and I didn't want to be assigned.
 
Last edited:
Fonz said:
You will not find more trading volume on SPX weeklies (instead of open interests) the last trading day, specially in the morning.
Expiration June 16th is a weekly.
More...
June 16 is a monthly
 
hhiusa said:
June 16 is a monthly
More...
Nope. The monthlys expired yesterday and the settlement value, SET, was determined at the open today. He's talking about the weekly SPX options that will expire at the close today.
 
Last edited:
Fonz said:
Depending on market conditions, I day trade SPX simple call and put options, on the last trading day.
Since yesterday, I noticed huge spreads from time to time. So yesterday, I was thinking that is just because of a Fed day. I don't use option on Fed day.
Also when IV of the SPX and the VIX spike, it is not unusual. Not the case today.

Today, I see exactly the same huge spreads, specially with 2430 and 2420 puts that I follow this morning (June 16):
At 11:22 ( I try to get out)
2430 = 4.50 / 6 for 2 sec, then 4.40 / 6.20 for a min
2420 = 0.85 / 1.10 for 5 sec, then 0.95 / 1.15 for a min

At 11:26
2430 = 5.20 / 5.50 much better
2420 = 1 / 1.15 not great, out at 1.05

Does anyone know why? Fed day was obviously yesterday.
My broker is IB.
More...
I know your strategy may depend on market orders, but if it doesn't the spread in SPX weeklies is largely an illusion. You can almost always get filled a nickle off the mid unless there is a retail limit order in there that makes it hard to see the true mid.
 
Fonz said:
Depending on market conditions, I day trade SPX simple call and put options, on the last trading day.
More...
Just curious, may I ask a couple of questions:

1. Do you find this a profitable strategy? And how is this compare to day trading the underlying SPX?

2. Since you were trading simple call and put options, were these directional trades?

Appreciate your comments.

For me, I started with very short expiration options (like you) but found out that with my strategy, I had to go to longer expiration to be profitable.

Best wishes.
 
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