Why did the market let me profit?

C

cttfs

This may be a dumb newbie question, so apologies in advance. I "accidentally" made some money and would like to understand why.

Looking at slightly ITM put options on an ETF, around 3 months to expiration... Bid/ask was 9.70/10.90, I put in an offer for 10.35 and get filled immediately. A few seconds later put in a bid for 9.90 and get filled. And did this a few more times in the course of a few minutes (for similar prices), for a few contracts at a shot. All while the underlying is basically steady.

Note that looking at the tape, the trades show up the same millisecond that my bid/offer hits the exchange. And broker is IB.

So my naive question is... If I am able to easily sell at 10.35 just by putting in a limit order, why is someone else willing to sell to me at 9.90? Or the reverse - if I am able to easily buy at 9.90, why is someone willing to buy from me at 10.35?
 
cttfs said:
This may be a dumb newbie question, so apologies in advance. I "accidentally" made some money and would like to understand why.

Looking at slightly ITM put options on an ETF, around 3 months to expiration... Bid/ask was 9.70/10.90, I put in an offer for 10.35 and get filled immediately. A few seconds later put in a bid for 9.90 and get filled. And did this a few more times in the course of a few minutes (for similar prices), for a few contracts at a shot. All while the underlying is basically steady.

Note that looking at the tape, the trades show up the same millisecond that my bid/offer hits the exchange. And broker is IB.

So my naive question is... If I am able to easily sell at 10.35 just by putting in a limit order, why is someone else willing to sell to me at 9.90? Or the reverse - if I am able to easily buy at 9.90, why is someone willing to buy from me at 10.35?
More...

How many contracts did you buy @ 9.90 and how many contracts did you sell @ 10.35?
 
Robert Morse said:
Same reason I once watched somebody playing craps and bet and through 12, four times in a row. A little bit of luck never hurts, but don't expect it to happen all the time.
More...

That was my first reaction. But this type of situation happened to me twice in the last couple of weeks - in different underlyings. And I wasn't looking for it, just sort of tripped on it. So I was wondering if there's more to it...

vanzandt said:
How many contracts did you buy @ 9.90 and how many contracts did you sell @ 10.35?
More...

Around 35 contracts, in and out (so qty 70 traded). Somewhat more than that the last time it happened, though it was a lower priced option and I think the spread I made was more like 10 cents.
 
How wide was the underlying at the time ? Filling 35 at better than the midpoint doesn't imply fat finger. Without a screenshot or a sense of the underlying it implies to me - that this pure fiction.
 
cttfs said:
That was my first reaction. But this type of situation happened to me twice in the last couple of weeks - in different underlyings. And I wasn't looking for it, just sort of tripped on it. So I was wondering if there's more to it...



Around 35 contracts, in and out (so qty 70 traded). Somewhat more than that the last time it happened, though it was a lower priced option and I think the spread I made was more like 10 cents.
More...
Hmmmmm.
I mean, I have never seen anything like that. I mean basically you're printing money. Keep doing it until it stops. imo at least.
 
Does IB have like an in house matching orders? They use to or maybe changed in forex within their brokerage and trader would actually have no spread getting in but pay a small commission. IB is so big, they could be an exchange, is IB the largest discount broker?
 
cttfs said:
This may be a dumb newbie question, so apologies in advance. I "accidentally" made some money and would like to understand why.

Looking at slightly ITM put options on an ETF, around 3 months to expiration... Bid/ask was 9.70/10.90, I put in an offer for 10.35 and get filled immediately. A few seconds later put in a bid for 9.90 and get filled. And did this a few more times in the course of a few minutes (for similar prices), for a few contracts at a shot. All while the underlying is basically steady.

Note that looking at the tape, the trades show up the same millisecond that my bid/offer hits the exchange. And broker is IB.

So my naive question is... If I am able to easily sell at 10.35 just by putting in a limit order, why is someone else willing to sell to me at 9.90? Or the reverse - if I am able to easily buy at 9.90, why is someone willing to buy from me at 10.35?
More...
Are you sure you didn't actually buy at 10.35 and sell at 9.90? I've actually gotten my bids and asks confused at the end of a long day before, you wouldn't be the first one of us to have that happen.
 
You must log in or register to reply here.
Back
Top