I had bought a vertical put credit spread at -0.42 credit. but the market was (-0.57 -0.44 ) seconds later. either way, I checked the T&S for the individual legs, and I had purchased the 63.5put above NBBO and sold the 65p at the bid, in a wide bid offer spread. to make it worse IB commissions are far from attractive. Is this common? For me, I usually get closer to mid price, but commissions are very often this high or higher for just 1 legged trades.
Why do we get worst prices than NBBO for combo spreads?
- Thread starter nixodian
- Start date
Spreads go to a single exchange, but the NBBO will show the high bid for a MM that also has a high ask (outside NBBO).
And a thanks to Mr. Morse who helped me figure this one out on Tuesday myself...I'm sure he'll make it in here.
And a thanks to Mr. Morse who helped me figure this one out on Tuesday myself...I'm sure he'll make it in here.
Robert Morse
Sponsor
There are 15 US option exchanges each with their own bids and offers that make up the NBBO. When you enter a Complex spread, you should not use market orders and you can't assume some market maker wants to match a few small orders on different order books on different exchanges. It is your responsibility to look for the best prices.
The market was what it was, but you didn't see it, because you have no volumes up.
Your single trade made somebody who had posted that puppy long before go "Woot! Woot!" and make that godawful "Cha-ching" mime.
The market went back to its more-expected pricing once your order was hit.
Your single trade made somebody who had posted that puppy long before go "Woot! Woot!" and make that godawful "Cha-ching" mime.
The market went back to its more-expected pricing once your order was hit.
Robert Morse
Sponsor
I suggest choosing the worst price you will accept. Enter an order better than that, then slowly cancel/replace your order until you hit your limit looking for liquidity. There are option MM that monitor the complex order books looking for edge to their values. From time to time you might even find a another customer order.
Spreads can trade through the book or touch the book without taking it out. There is a real disconnect, however between a legal fill and a really sloppy fill. Everyone who has ever worked in the industry has heard the case made for enough bad fills cost a whole lot more than cheap transaction costs.
This is a sloppy fill. Trade friction is transaction costs, b/a spreads and slippage. May have been the market or the broker, but this is a sloppy fill.
A number of the firms offer walk or work limit products. They do exactly what you should have done. Started with 50 cent credit - left it out there for a few seconds. Cancelled and re-entered at a 49 cent limit and worked the order down to limit you found acceptable. Higher transaction costs - sure, but look at overall trade friction. This starts to become an expensive lesson.
I was on the team that built the Walk Limit at optionsXpress, but a handful of firms now offer similar functionality.
This is a sloppy fill. Trade friction is transaction costs, b/a spreads and slippage. May have been the market or the broker, but this is a sloppy fill.
A number of the firms offer walk or work limit products. They do exactly what you should have done. Started with 50 cent credit - left it out there for a few seconds. Cancelled and re-entered at a 49 cent limit and worked the order down to limit you found acceptable. Higher transaction costs - sure, but look at overall trade friction. This starts to become an expensive lesson.
I was on the team that built the Walk Limit at optionsXpress, but a handful of firms now offer similar functionality.
Limit order was used. would expect a better execution from IB no? commissions I got made it worse.
Robert Morse
Sponsor
You took liquidity. We offer Smart routing to avoid take fees on equity option spreads on many platforms including Sterling Trader Pro.