Registered: Mar 2004
04-14-13 02:09 AM
Another idea for those who claim that IB's cancellation fee is still killing them and is a very big part of their trading cost is to add a 1 cent option to their single order option and make it a combo so they can cancel it anytime but the problem is that their oder won't be seen in the bid and ask because the order is not sent to the exchange. Let me explain.
You want to buy a 55 call for a stock that is trading at 50. Let's assume that the bid/ask is 0.2/0.25. You want to but 10 contracts at 0.24. If you put your order, for penny adjusted stocks the bid/ask will change to 0.20/0.24 ( for non penny adjusted options, you will still see 0.2/0.25 but you will be the first seller and your order will execute faster at 0.24 or even at 0.25 if there is a trade.
Now to bypass the cancellation fee, you can add to buy a very out of the money call/put which has no buyers and the ask is 0.01.
Then you can put a combo order to buy both at 0.25 (0.24+0.01).
Now if you change your mind and modify your combo order, you won't pay cancellation fee. However you will pay $1 for that almost worthless option. Who knows, that worthless option might also make you rich.