Various Limitations Imposed by Brokers on Option Positions

I spoke with market regulation at the CBOE. "Customers" are restricted from two sided order flow to open because customer orders have priority to members. It also applies to the complex order book for the same reason. However, you can open/close. So if you're bidding 1.00 for 100 spreads, you can't offer anywhere. If you buy 30 at 1.00, leaves 70 on the bid, you can offer the spread out 30 times to close at the price you choose.

I hope this helps.
 
Quote from spindr0:

Again, why would one close spread A and simultaneously open spread A? That just incurs slippage and commissions.

If closing spread A and opening spread B and there's a common leg on opposite sides of the market, factor it out and execute the synthetic link (spread C).


Non sequitur: Anyone know of a web site that lists the dividends on groups of stocks - say the DOW 30 or S&P 500, etc.? I really don't want to look them up one at a time. TIA
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In a spread in a stock like aapl, if you believed the spread was worth 1.25, and the bid/ask on the screen is 1.00/1.50, would you want to bid 1.05 and sell out what you bought at 1.40, while still bidding 1.05? That's why. Also, with spreads entered as one order, there is no slippage.
 
Quote from rmorse:

I spoke with market regulation at the CBOE. "Customers" are restricted from two sided order flow to open because customer orders have priority to members. It also applies to the complex order book for the same reason. However, you can open/close. So if you're bidding 1.00 for 100 spreads, you can't offer anywhere. If you buy 30 at 1.00, leaves 70 on the bid, you can offer the spread out 30 times to close at the price you choose.

I hope this helps.
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Thanks so much for your help. As always, it is a great pleasure to read your professional responses.

Does the open/close exception apply also to complex orders or only to single orders?
 
Quote from dragonman:

Thanks so much for your help. As always, it is a great pleasure to read your professional responses.

Does the open/close exception apply also to complex orders or only to single orders?
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They told me both.
 
Quote from rmorse:

I spoke with market regulation at the CBOE. "Customers" are restricted from two sided order flow to open because customer orders have priority to members. It also applies to the complex order book for the same reason. However, you can open/close. So if you're bidding 1.00 for 100 spreads, you can't offer anywhere. If you buy 30 at 1.00, leaves 70 on the bid, you can offer the spread out 30 times to close at the price you choose.

I hope this helps.
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If my account is labeled "professional customer" am I also subject to these "two sided order" limitations since I am still considered a "public customer"? Or in this situation there are no such limitations?
 
Quote from dragonman:

If my account is labeled "professional customer" am I also subject to these "two sided order" limitations since I am still considered a "public customer"? Or in this situation there are no such limitations?
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Different exchanges have different rules for pro cust. Most exchanges allow two sided orders but charge $0.20 for exchange fees rather than $0.00. You can call me tomorrow if you need more information.
 
Quote from rmorse:

In a spread in a stock like aapl, if you believed the spread was worth 1.25, and the bid/ask on the screen is 1.00/1.50, would you want to bid 1.05 and sell out what you bought at 1.40, while still bidding 1.05? That's why. Also, with spreads entered as one order, there is no slippage.
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You could achieve it by placing asell to close order on the call spread and place a buy to open on the equivalent put spread. Yeh, I know, four legs instead of two :)
 
Quote from ben111:

Are these limitations only for US options and option spreads or also for other products?
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Only options and option spreads because if your making two sided markets at the exchange, your order goes in front of the market makers. So, if your simulating market making as customer, they want you to pay extra as pro cust. This might also put you on parity with the MM rather than in front.
 
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