I've never submitted an option limit order outside trading hours for possible execution the next day. Sometimes iron condors or back ratio spreads take a bit of time to setup and I would prefer to do this in the evening when I have more time to study it. I can use the Black Scholes option pricing model (current IV of the option chain at the expiration I want to use) to estimate the price for the combo or use historical last close data for each leg. I'm selling far enough out in time and OTM that the combos that I hold usually don't change drastically day to day (when I open, they have close to 0 delta and I try to collect a small credit). I think my broker will also let me submit a conditional execution based on the price of the underlying. My question is if I set an aggressive entry, say I take the last combo price and then discount it aggressively, say the combo last traded for 2.50 and if I enter a limit of 1.50, if the underlying opens up at the same price as it closed and if very little changed, will I get a fill close to 2.50 or would I get a crap fill closer to my limit..assume S&P500 stock or popular ETF? If so, would be nice if there was an order algorithm that let me enter 2.50 as my limit and then drop the price 0.05 every minute until it hits 2.30...I could do that via the API, but not sure it's necessary.
I would be careful with setting a 1.50 limit and going for a 2.50 fill at open. Liquidity can be pretty thin and spreads wide at open, so you’re more likely to sit on the book until someone realizes you set too good a price.
I had the opposite happen, I should have entered a much better price than I did, even though the price i got was pretty good, but index derivatives start trading at 2am, in any case, certainly wouldnt do it with market orders, even in regular hours
That's what I do: create most of my orders at night. And I usually get screwed if I allow to pay more than the combo may be worth, so I have to set tight limit prices and see which ones may get filled, then during the day I may adjust unfilled orders to try to get those filled.
The liquidity is extremely thin during the AFM hours as some of the posters have already stated so if you want to enter a limit order, it would be best to enter the order with a limit price that you really want i.e. 2.5 instead of 1.5 in your case. IB has rel limit orders where the limit price is pegged to the NBBO by an amount that you set yourself. Not sure if it's available for option combo orders. If it's available, this might help you in achieving what you want to do. For me, I usually just put in a limit order with a limit price of what I want and just let the execution god decide whether to execute it or not. If it gets executed, great, if not, oh well.