I wanted to share how my orders are getting handled now that I am paying $5.00 + $.45 per contract. My rates did increase from Cheap Brokerage but please evaluate the evidence and find out through your Monthly Statements how many of your "Market Order" fills are way below the Offer or far above the Bid, there is a reason your Cheap Brokerage Guys are driving $200k Cars! There's a stock option that's got a $1.16 x $1.40 price, the stock start's to tank and I threw out 25 contracts that got filled at $1.33. I was using two different Clearing Houses to test how badly the fills are at "F-the-Customer Clearing House" I was up pretty good and decided to test out how orders are handled with two different CHs, White Knight and F-the-Client Clearing House". Testing my theory in a Wild Market, I threw out 25 contracts on a stock that was declining, the Bid was $1.16 x $1.40, my 25 contracts got filled instantly at $1.33 which surprised me. Why can those Brokerages offer you $.15 or $.35 per Option Contract, they must be really good people looking out for your best interest? Hell No! These assholes can't even keep a Trading Platform that does not crash on the Active Trader, so where is all that money going? I am under no obligation to trade heavily to avoid getting dinked with $300 in platform fees plus all the extras even though my other platform is covered by all my trades. So how do the fills work, if your paying $5 per Option Order or $3.00, your saving money, right? I had 100 contracts of Company XYZ that's got some volume, each Clearing House has 50 contracts so lets see how the fills went on Tuesday's crazy day. The Bid is $1.14 x $1.40, Options that are not super traded like Apple's weeklies, this is one of the more mild spreads. The stock begins to tank, I throw out 25 contracts and this new Broker fills them at $1.33, am I seeing things straight because at Brokerage F-the-client, you don't see this! I sell have to sell my 50 contracts at Brokerage F-the-Client in smaller lots, I throw out 15 contracts and they get filed at 5 at $1.14, 5 at the next level $1.11 and 5 at $1.10! I wait a few minutes and the XYZ is up a few pennies, the spread is back to $1.17 x $1.47, so I throw out another 25 contracts at the Market(I bought them at $.30 so I am going to make money unless the HFTS Gang kill the Market in that nano second). My 25 contracts get filled at $1.43! I shake my head, can't believe this is real! Now with 1.17 BATS willing to buy 7 contracts,AMEX, COBE, PHLX and PCX are at $1.14, I am safe, right? I throw out 18 contracts and I get 9 filled at $1.17 and the rest get filled at $1.14(I noticed that none of those exchanges were used except BATS at $1.17, they took the 7 and gave me 2 extra at $1.17 and internalized that order at $1.14 because no prints from any of those Exchanges were used! To get out of the rest of my contracts with this Broker, I used a limit order to get the rest filled at $1.30 by waiting a few minutes it got filled. You get what you pay for, people who use limit orders on Big Spreads, these Brokerages are great only if you never have to use a Market Order. If your bidding on a Option that's $2.10 x $2.50 and your bidding at $2.20 when $2.10 is already thin, these Brokerages make lots of sense and will save you money. What's scary is when there is a Clearing House that has filled me at $2.16 when I was bidding on the $2.10 x $2.50 stock, that made me shake my head asking "How much money did I actually lose or is "Ignorance Truly Bliss" if we don't care about Slippage? In one day I saved over $800 in price improvements vs F-the-Client Brokerage, my terms might be harsh but you Traders really need to understand there is a reason they can afford to send you a email saying "Today is $2 Trade a thon!" Or "We are the lowest price, we offer you trades at $.15 or $.35 per contract. They don't make money on your limit orders, their gravy train is when the Market is moving and you need to get on board that stock or option. I can show you 900 trades I made this week, only 6 might have been at the Offer, that's nothing compared to getting filled at the Offer my favorite $3.10 x $3.90 and they fill you at $3.89 on 3 contracts and you get filled at $3.90 on the 27 more. I had to pay up because that stock is hauling ass up and those contracts would eventually get sold at $6.30. Market Orders are a necessary evil, the question you must ask yourself is, are you paying $500 for your $5.00 +.30 Options or you getting a fair deal? I forgot to mention the buy side of this equation, at F-the-Client Clearing House, I had to use limit orders, the other Brokerage filled them very nicely without using limit orders when stock began to move. Today's Apple and AGN trades were more examples how your really getting slammed if you don't examine how your Market or even your limit orders are filled. I had a limit-order Bid $3.90 x $4.10 and I use a Limit Order to sell at $4.00 and I get filled at $4.08, that's just weird, if you shop around and get a good Brokerage your going to be amazed how bad those Cheap Brokerages actually screw you over!
I can't think of a single reason you'd ever use a market order for options. Even if you need to get out now just hit the bid or lift the offer. Anyway that other broker is probably selling your flow as most are. Equity markets are pretty much garbage right now due to all the fragmentation and latency-arb. When it comes to fill sensitive stuff like options you'll have to deal with it.
Market Orders are a nasty evil if your chasing the Crazy Stocks, I saw at one point the I.V. on VRX hit 200% from its normal rate. This week has been really crazy, profitable but crazy. One of my friends who thought he was going to make a fortune selling volatility last Wed-Friday lost $300k by Tuesday. You read about people selling Volatility all year when they were standing around the Options Pit only to have a Monday and Tuesday nearly blow their capital up. I know for many its a Cardinal Sin to pay the Market Rates, today with Apple I had to pay the Market to catch the $107s-$108s before it returned to $109.00 Even with the $109s using Market Orders I only paid $.01 extra, that worked out pretty decent. Its worse when the Brokerage's Margin Department buy's people in or closes out their Naked Puts like what happened to my friend. As for the Low Price Brokerages, they play their role if your system is bidding, I've had orders in PLAY $40s that finally got filled when the stock fell back to $37, the Low Price Brokerages have no role in helping customers out with Market Orders, that's the point I am trying to make, not to use them. Market Orders are like that "In case of Fire, Break Glass!" Sign, using Limit Orders is only logical and reduces slippage greatly!
I like market orders. i just want to get filled ASAP. i can't imagine waiting -- i'd go nuts I dabble in the highly liquid stuff anyways with very little spreads.-- and in the greater picture of things...it's only pennies we're talking about in a world of dollars, so to speak.
So which broker gives you good options fills and which broker gives you cheap commissions but bad fills?
I am currently experiementing with options and interested in what you said, particularly in relation to your friend who lost $300k. When you hear of someone losing $300k in less than a week, you automatically think the person has lots of money. If the person has lots of money then why did a margin call happen - was it because he forgot to put the money in, or because he did not have the money to put in - either way he got caught and to get caught for that amount of money would make me question the persons ability to make sound trading decisions based on the methods used - for, anyone who has traded for sometime knows well that the only guarantee when trading is that you "will" lose, but this does not mean that you have to lose big! J_S
I think you are giving a lot of credit or anger to your"broker", when they likely had little control over that order. In many circumstances, the DMA to the exchange is another broker connected to their order router. If you sent it to an exchange directly (DMA), you might have caught a buyer you could not see. If you sent it through a "smart" route, it might have entered an option dark pool and was part of an auction process, giving you price improvement on that trade, that you might not get the next time. As the trader, you have to take control of the pricing and work your orders to get the best price. It is your responsibility, unless you are using an institutional broker to work your orders. I would NEVER use market orders, market on open or market on close orders for options. NEVER. Even for liquid, multiple listed options, if there is no "paper" on the book, you are subject to a few market makers that trade on multiple exchanges with the same trading system. You can get very bad executions over a short period of time, becasue when they do many trades over a short period, they widen their markets until they can hedge and reprice Ivol to current supply/demand. I'm telling you this an an X-MM that made my living (25 years) from customers that entered market orders. MM LOVE market orders and pay for that type of order flow. I was also a Floor Official on the AMEX and had to deal with complaints from customer orders that were unhappy with their executions and asked for better pricing or a bust of the trade. The exchanges eventually set rules for this, so there was little to interpret. I'm just trying to help when I say NEVER, NEVER, NEVER use market orders with options. Bob
Hi Robert, Apex's Clearing House has treated me very good, I can't believe how bad the fills were with my cheap Brokerage even though I was only using a small part of my capital. They are not the first Brokerage I've written honest reports about, I've been honest telling Elite Trader's Community exactly what I experienced and how I was treated. I signed up a account for my girlfriend, I used a promotion code that "Cheap Brokerage" lost so they cheated her out of all her free trades, she was suppose to get $500 in free trades. Instead we got nothing, they had a deal with "Trading with Cody", I wrote him telling him he need's to stop using a Brokerage that's ripping people off! I confirmed with both the manager and the Broker they would honor "Trading with Cody's" Promotion, do you know what the manager recently wrote me? He said "We do not have any record of you putting in a coupon code" even though I used "Cody's Trading Link" to sign up her account. They pulled the same shit on me back in 2013 when I opened up my account, they agreed to give me free trades because I would open a small account and trade decent volume. What did they provide me and my girlfriend, we lost $25,000 on their platform crashing constantly, I would only use that brokerage when I felt my more secure Brokerages were loaded up with lots of good ETFs, Bonds, International Stocks and Futures. I am not bitter, I want people to know they are not getting the best fills when they are using certain Clearing Houses, last time I checked with you all your Clearing Houses were very good, everyone you showed me I have the highest regard for, not the one I am bashing
RabidTrader, I can't really comment on the retail promotions, except they should honor what they offer. To me, and I know this in very general, but if you are looking to open a brokerage account, there are investors and traders. For both investors and traders, there are those that do it as a hobby or to earn a return and those that are looking to run a business. If you are looking to run a business, you have to look past the promotions and the commission rates and see how that broker can help you run your business. You still want fair rates and good trading platforms, but support/service and advisory can make a big difference in your success. Bob
Hi J, he was making good money all year until Hillary tweeted her remarks about the drug companies and that's when he got clobbered. I have emails dating back to June warning him to back off the "Naked Put" selling, he was addicted to watching all his picks go good and all the options expired worthless making his problem even worse. When I sell "naked puts" my Brokerage makes me keep $500k in liquid assets to cover any margin calls. To prevent myself from falling in to my friend's trap because I was making nice cash selling Puts on great stocks that rebounded. I opened up 8 different accounts over the last two months, one was for my girlfriend(cheap brokerage with a weird Clearing House that screw's you over!), added funds to Just2Trade, OptionsXpress(they are at the high end of my commission structure but have lots of great tools, I agreed not to post my commission after negotiating. Most Brokerages don't like people like me posting my commission because it makes them have to pass that deal to others who don't trade as heavy as I do). My buddy's Brokerage liquidated his positions on Tuesday because he had sold a ton of "naked puts" on XBI, VRX, AGN, MYL, ENDP, LJPC, BMY, CELG, GILD, BIIB, ADRX, NVAX, ARWR telling me "I love those stocks, I don't mind if they get "put to me!" and even solid earnings reporting stocks like CCL, RCL and NCLH. His goal was to make a consistent 7% per week on his entire brokerage accounts, that's quite unrealistic don't you agree? You asked a question "When you hear of someone losing $300k in less than a week, you automatically think the person has lots of money. If the person has lots of money then why did a margin call happen" Margin does not have to wait for you to wire in cash, back in 2000 I had a few friends making the National Media because Charle's Schwab liquidated their positions before they could meet their margin calls, one of them ran to the Bank telling Margin "I am wiring you the funds now(9:00 AM PST)" to cover his nasty equity hit. Margin is not always kind, depending on how big your Brokerage is, they might not give you any time and sell out your position unless you've been with them for years and they know you have money to pony up more capital. My friend was not given that chance, he's got money, he's a multi-millionaire who made a stupid mistake by selling more Puts making his account get crushed. They covered his position when all those stocks were at their utmost lows, strange how that works. He told Margin he was going to make the Call but they did not give him that option, they were more worried about risk after what happened with the Swiss-Euro trade. I heard his Brokerage lost hundreds of clients last week to bankruptcy. Working at a Brokerage, is no protection or guarantee that Margin won't be liquidating your positions if they feel their capital is in jeopardy. I have not spoken to that friend since 2008 after he lost his entire net-worth while working at one of the big online brokerages as "head of options". To this day, maybe you can help me understand why he spent two hours trying to talk up the merits of BSC to a person who usually only traded stocks below $20. Why did he want me to change my outlook or talk me in to selling my Puts? When Bear Sterns started to crumble (that's when I started to really get hooked on options) I broke away from trading my Sub $20 stocks to focus on Bear because it was making some people lots of money and many more stocks. I still traded sub $20 stocks because the entire Stock Market seemed to fall below $20! The stock looked sick to me, I am not a good chart reader, all I do is look at Volume, manually use those yellow sheets you buy at Costco and calculate price and volume using my price point method, basically what Nick Darvas did back in the 1950s and Humphrey B Neil's method. It works for me, on the intra-day level I have more success with my pen and yellow pad method than looking at charts,. Back to the phone call, I get a phone call from the head of options trading asking me what I thought about Bear Sterns, he could see in my account I assume that I had lots of Bear Puts scattered from $50 to $75 and he wanted to know why I had moved away from trading Pink Sheets, OTC and sub $20 stocks, he asked me why I changed my method. Trading smaller stocks you can tell when their about ready to go BK, two years ago another person who I thought was a friend asked me if I was still trading "Radio Shack" daily. "Yes", and he asked if I was Short? I told him I had bought $40,000 worth of the $2.00 Puts Leaps after RSH spiked above $3.00, I said "yes" and told him I bought some $1.50 and even $1.00 Puts." My friend who was the Option Trading head kept asking me "Why, Why, Why?" This started to cloud my judgement because he was trying to tell me how Jim Cramer said "Bear Sterns is a great company, that Bear is a steal at $50.00". Why was this former friend trying to change my psychological state of mind, my wife at the time was pissed off, she said "I think he's trying to talk his position up!" While on the phone(he was on Holiday) he yells "F'ing bastards! Those F'ing bastards just bought-me-in!" His equity went from $500k down to $30k while he was trying to talk his position to me, he blew up eventually and it's been almost 8 years since i heard from him. My new online friend, he Broker did not give him time to wire them money, they covered his positions in XBI near $60, covered his AGN Puts near $250, VRX near the final drop to $155 and the rest near the bottom. They covered him when the biotechs finally capitulated. Margin does not magically just "Buy you in", they have to be worried their going to end up negative and that's where they finally bought him in. I think he was holding out too long after Monday's second sting, he was hoping that Tuesday would bring him in. My position size dropped off a cliff on Tuesday, I started trading small because I was worried. You can see how small I dropped my size on ADXS trade. He promised me "If you buy me what your buying, I will wire you the money now!" I sent him a email earlier telling him I was going to wait near the Close before I started buying my options. I posted those picks on Tuesday with my capital gains until I got one of those stupid "cut and paste" photos from some asshole so I deleted all my purchases and capital gains that day. Margin bought my friend in when ADXS fell to $9.56, that's what he was freaking out on the phone about. That's when I started buying ADXS in small lot size after churning it back and forth along with VRX, AGN, ENDP, MYL, ETE, ETP, XBI, IBB and the 3x Biotech nasty witch I bought a few thousand shares of that nasty even though Jim Cramer say's those are evil products, I thought we hit a bottom.