Why does individual leg trade through complex order book with no fill?

[TheBigShort]

Hello all,

This has happened quite a lot and i am trying to understand it a bit better. Here is an example:

When i plot the traded prices using IBKR of ROKU 62 strike July26/Aug2 call calendar on the 1 minute time frame over the past few days, i see that the calendar has traded in the range of $-.25 and $2.80.

I was trying to fill this calendar around $0.80 on Thursday and never got a fill even though IBKR is showing that the price traded as low as $-.20 (an arbitrage) that day. Indicating that the calendar traded through my resting order.

My question is 3 parts.

1) Is IBKR showing me the traded price of the spread or are they just quoting me when the individual legs went off at the same time?

2) Why is the price trading through my resting complex order (calendar)?

3) Why are arbs happening on a pretty liquid stock (calendars trading below 0 cents)?

Thank you

Below is photo from IBKR of the calendar spread 1 min data. With highlighted arbs.

 

[poopy]

It's not trading at a credit. I believe those print when one leg trades and references the last (stale) fill in the other leg. No volume shown on those. There is no impact to the forward that would offer a credit calendar.

Unless you're FOK you're not marketable.

That's my guess but I trade marketable as my shit is exigent!

 

[Kevin Schmit]

1) Is IBKR showing me the traded price of the spread or are they just quoting me when the individual legs went off at the same time?
2) Why is the price trading through my resting complex order (calendar)?
3) Why are arbs happening on a pretty liquid stock (calendars trading below 0 cents)?

3) They aren't. IB is transmitting bad data points. These are effectively "snapshot" (once every ~250ms) quotes. So if, at the exact time of the aggregation cutoff, MM's have updated their quotes on one leg but not the other (which could happen a microsecond later, but still too late for that 250ms update), you'll have a bad quote. This affects not just IB, but any source (ORATS, CBOE/LiveVol) that uses snapshot data for historical testing. For live analysis of quasi/stat arbs of spreads on the IB feed, I would use a 9-tick moving median. This might be overkill: 3 ticks is too short and still shows a lot of bogus spread prices, 5 ticks might be about right, but even with 9 ticks there is still a daily untradeable spike at the close of the underlying(s). See attached png from Friday tracking a couple of similar spreads for quasi/stat arbs.

2) it can happen, but probably isn't. IB's internal algo will usually catch this and fill you on the legs. Their spread execution algo appears to be working off of an actual (not snapshot) feed. If the apparent arbable quotes were real, you probably would have been filled.

1) I don't know what IB's charting is showing you in the charts (trades vs quotes?) but you can get the snapshot quotes pretty efficiently in a spreadsheet via RTD (combined with a small about of ActiveX VBA to get the SecID's for spread quotes). If the spread is quoted in the COB, and you specify the exchange (eg CBOE for SPX, ISE for SPY) they'll show you that price, otherwise the aggregated legs price. I am not sure if this holds 100%, but it holds generally. You do have to specify the exchange for this to work consistently, SMART won't do it.

Generally spreads, even across different names, stay within "professional" no-arb bounds. That is they stay within limits so that if you account for the full spread on all the legs in and out, the arb profit disappears. However if you can execute for the spread cost of one of the legs, e.g. for a fly execute at the spread of the worst of the 3 strikes, then you are golden, you can trade any time the e.g. spread vs spread price is near those bounds and make money nearly every trade. Retail stat/quasi arb is a game of good execution, mostly in the COB.

 

[TheBigShort]

It's not trading at a credit. I believe those print when one leg trades and references the last (stale) fill in the other leg. No volume shown on those. There is no impact to the forward that would offer a credit calendar.

Unless you're FOK you're not marketable.

That's my guess but I trade marketable as my shit is exigent!

The ibkr software not showing any volume even on individual legs. I cant get the volume on the screen for some reason.

I woud think if they were referencing current fill vs last order on second leg we would see less vol on given the volume on Roku.

I remember @guru was getting fills on cals and flys for arbs! Here is referencehttps://www.elitetrader.com/et/threads/small-options-arbitrage-on-amzn.329406/

 

[poopy]

I meant that zero volume means that these are clearly not hitting the tape.

 

[Kevin Schmit]

I remember @guru was getting fills on cals and flys for arbs! Here is referencehttps://www.elitetrader.com/et/threads/small-options-arbitrage-on-amzn.329406/

That was in 2019,I doubt he is still getting them.

Speaking of Guru, I saved the attached png he posted, which shows the number of bad ticks (all the spikes up and down in the top plot) that IB transmits on spread quotes/charts. IB charting of options spreads is pretty questionable.

 

[TheBigShort]

Generally spreads, even across different names, stay within "professional" no-arb bounds. That is they stay within limits so that if you account for the full spread on all the legs in and out, the arb profit disappears. However if you can execute for the spread cost of one of the legs, e.g. for a fly execute at the spread of the worst of the 3 strikes, then you are golden, you can trade any time the e.g. spread vs spread price is near those bounds and make money nearly every trade. Retail stat/quasi arb is a game of good execution, mostly in the COB.

Thanks for explaining that kevin.
If I am using a second tier broker like questrade for example, will they have a different routing system than say IBKR that would impact fill prices of a resting complex order?

Say pre market on a stock that has just had a 5 sigma move and bid/ask opens $-2/$5 on a calendar spread and im resting at $1 and tons of volume is going off, would IBKR be able to execute a complex order better than Questrade?

 

[taowave]

I make a decent living "arbing" away,putting on Verts,Flys and the occasional calendar for credits..

2 years ago I traded over 1 million contracts,and I would guesstimate current business is off by 80 percent or more with much thinner margins..

Sucks...

The ibkr software not showing any volume even on individual legs. I cant get the volume on the screen for some reason.

I woud think if they were referencing current fill vs last order on second leg we would see less vol on given the volume on Roku.

I remember @guru was getting fills on cals and flys for arbs! Here is referencehttps://www.elitetrader.com/et/threads/small-options-arbitrage-on-amzn.329406/

The ibkr software not showing any volume even on individual legs. I cant get the volume on the screen for some reason.

I woud think if they were referencing current fill vs last order on second leg we would see less vol on given the volume on Roku.

I remember @guru was getting fills on cals and flys for arbs! Here is referencehttps://www.elitetrader.com/et/threads/small-options-arbitrage-on-amzn.329406/

 

[poopy]

I make a decent living "arbing" away,putting on Verts,Flys and the occasional calendar for credits..

2 years ago I traded over 1 million contracts,and I would guesstimate current business is off by 80 percent or more with much thinner margins..

Sucks...

lol cool story, tao.

 

[taowave]

LOL!!

lol cool story, tao.