I noticed today that my buy orders for VXX vertical spreads (good-till cancelled orders that had been sitting for a while) did not get executed even if there were trades that occurred below my bid. In another case the ask went below my bid, and again no execution, and no trades in the market either. Is there any explanation for this? I would genuinely like to know, so that I can understand the execution or bid/ask data issues in spreads. I have portfolio margin and plenty of margin left (~75% of account NAV); however I have negative cash balance equivalent to ~10% of account NAV. Negative cash balance has never been an issue so far, so I don't believe that is the reason. I understand options are not marginable but that should not matter under portfolio margin. Thanks for any insight.
Vertical spread execution
- Thread starter Neutral
- Start date
Orders in the complex order book have nothing to do with the markets in the legs. You need someone that will trade the spread with you. Margin and bid ask spread in the legs, or the other stuff you said are not connected to your order. By the way, what is the name of your broker? Some brokers like IB don't place the order in the complex order books until they believe are executable. They keep the order in their smart router.
1245
But I was talking about the bid/ask reported for the spread itself. Furthermore, in at least one case the spread was traded at lower prices than my bid for the spread, several times throughout the day. The broker is IB. As for their "belief" that it is not "executable", it couldn't possibly be the case when the ask is lower than my bid, or trades are occurring below my bid. If so, it has to be either incompetence or something more sinister. So, what could be the reason?
Sounds like IB is your problem. They don't send complex orders to the exchange until their server decides to. If you trade a lot of spreads you might consider changing brokers or choose an exchange rather than smart route and pay $1.00 per contract. I had many issues with complex orders with them so changed. Next time call support at IB and ask why you are not getting an execution. Have fun with that conversation.
You mean we don't see NBBO?
That depends, you might see NBBO if there are no other internal bids/offers in IB.
That is an interesting problem as you can't really trust Mid quotes in IB for option spreads. For instance I have been able to get filled substantially better than mid in SPX flies and other times I don't get filled at all.
I usually use two or three sources for the mid values of my spreads.
To be honest, I don't remember if the market on spreads at IB starts with the NBBO then shows order in their system, but I was told the market you see on the screen in TWS is not the COB inside market. Certainly not the combination of all COBs. I know we are talking about VIX which is only traded on the CBOE. In my opinion TWS and IB does not excel at complex orders. The fact is that you will "never" by spreads on the bid or sell on the offer anywhere close to the NBBO of the legs because your order is not represented on any exchange. If a customer order were to come in at a really good price because of a market order, Timber hill would just penny you and buy in front of you because there was too much value in the trade.
1245
If you choose an exchange (rather than SMART routing) they don't guarantee that all legs would be filled. You can get unbalanced partial fills, apparently, and you just have to take it. And I did send a message to support towards the end of the day. I might get an answer tomorrow. Should be enlightening.