WTF? Down 15k on huge option mispricing. Can someone check please

PoopyDeek · Apr 30, 2020

guru said:
I'm not sure if this is related to IB, since these options are so illiquid that no one trades them (or because no one trades them). So what do you expect other brokers to do with options that no one trades and therefore you cannot know how other brokers may show P&L for them?

IB (and other brokers) may not be able to determine what those prices may be.
Even nearer-term 3-month CL options have huge price discrepancies all over the place on the options chain:

View attachment 226569

While for those 1-year illiquid options I can set any bid & ask prices I want (personally as a retail trader) and mine will be the only prices you may see and my bids will determine what's on your P&L. While there is no arb opportunities on options that no one trades.

I don't know what may happen at other brokers, but no one has experience with illiquid options that almost no one trades.
All options guides, books, trainers, etc - advise not to trade illiquid options. When you do, you're the only one trading them and therefore you're on your own.

Though in your case, I don't think there is a big cause for concern yet, because you should be able to get in & out near reasonable price or generally an average mid-price between similar options, because some market makers will pick your orders. You may just lose a lot on slippage.

IV is solved by price; hence "implied."

They marked you to the 4.00 offer. That's why you don't short naked vol in commodity vol. "If there is no spread... there is no trade."

"How can you sell the puts if you haven't bought the call!" Pink Floyd, "The Wall"

Overnight · Apr 30, 2020

PoopyDeek said:
...

"How can you sell the puts if you haven't bought the call!" Pink Floyd, Dark Side of the Moon.

Poopy still has me on ignore for some reason, but I saw this and HAD to make an edit...

"How can you sell the puts if you haven't bought the call!" Pink Floyd, Dark Side of the Moon.

No, it's "How can you sell the puts if you haven't bought the call!" Pink Floyd, The Wall.

PoopyDeek · Apr 30, 2020

You have little recourse if they blowout a naked position. They are not obligated to use mid on the MTM calc. Yes, IB sucks balls.

Tomaz26 · Apr 30, 2020

They marked you to the 4.00 offer. [/QUOTE said:
So If I understand this correctly, later when I closed the trade and ASK was 12, they could have just as easily marked me to 12 and sold me at 12, making me loose 40k.. If this is as simple as just puting on a sell orther to nuke someone out of a trade, wow.. Sure my problem is being in such inactive chain, but still.. Never thought this is as easy to screw someone

zdreg · Apr 30, 2020

Tomaz26 said:
. Now when I closed the trade, I did it at 1.85, and ask was 12 I mean if they would sold me out at 12, I would have 40.000$ loss not 15k one..

Did you end up with a profit because you bought back at 1.85?

Tomaz26 · Apr 30, 2020

zdreg said:
Did you end up with a profit because you bought back at 1.85?

Yes. As I previously sold two at 2.25 and two at 2.01

Tomaz26 · Apr 30, 2020

PoopyDeek said:
You have little recourse if they blowout a naked position. They are not obligated to use mid on the MTM calc. Yes, IB sucks balls.

So this is IB related at least partly.. MAybe time to change brokers

Or my original plan to just leave options to you big guys and focus on trading with underlaying directionally.. Certainly less math involved

PoopyDeek · Apr 30, 2020

I didn't read the whole thread. If IBTWS blows you out on a risk-figure it will send the order at the market. So no, it doesn't have to fill at 12, but certainly can. I'll have to read your comments.

Tomaz26 · Apr 30, 2020

@PoopyDeek I have a feeling you stay away from energy related options right? Or did you take an oportunity on any of those huge IV spikes in recent weeks. In near term contracts I mean.

PoopyDeek · Apr 30, 2020

Tomaz26 said:
So this is IB related at least partly.. MAybe time to change brokers Or my original plan to just leave options to you big guys and focus on trading with underlaying directionally.. Certainly less math involved

I have never been auto-liquidated by any broker other than IB. I was partially liquidated on a short box back in 2001 by IB. The fill was 0.80 cents off the value of the box and they eventually covered the loss on their erroneous liq, but apparently they haven't improved over the years.

My point is that you don't have any recourse when the vol or price marks against you in a short single. I can think of a million reasons why someone would lift the offer on that put... to juice their marks, etc... short 20 put spreads, but don't short naked vol.