I was just wondering if anyone has tried it yet and what the fill time was like. I've just continued to trade at the major exchanges for now, but was curious.
Obviously YOU didn't read this from IB: Penny-Priced Options Now Available in the U.S. In the latest step in cascading transaction costs brought on by technology, as of October 24, 2006, Interactive Brokers has cut the minimum price difference for US listed options from a nickel to a penny (i.e. $5 per contract to $1 per contract). Online Brokers and Direct Market Access providers have been under pressure to cut prices for several years. The listed options markets have been relatively immune, but no longer. The SEC mandated a penny pilot program beginning on the 27th of January 2007, in which the six US options exchanges will have to reduce the minimum price change from 5 to 1 cent for options listed on 13 underlying stocks. Interactive Brokers is jumping the gun, and in a first for the US options industry, has made penny pricing on options available as of October 24, 2006. Geez, if you've got nothing to add just don't post but for those of us that actually trade options....... has anyone given it a go?
Thanks for bringing me up to date on this. Unfortunately one cannot just hit the bid or lift the ask. Will a (SMART?) market order be executed against the penny bid/offer? EDIT: apparently one can from the OptionTrader page.
Here's the complete message from IB if anyone didn't get it: Penny-Priced Options Now Available in the U.S. In the latest step in cascading transaction costs brought on by technology, as of October 24, 2006, Interactive Brokers has cut the minimum price difference for US listed options from a nickel to a penny (i.e. $5 per contract to $1 per contract). Online Brokers and Direct Market Access providers have been under pressure to cut prices for several years. The listed options markets have been relatively immune, but no longer. The SEC mandated a penny pilot program beginning on the 27th of January 2007, in which the six US options exchanges will have to reduce the minimum price change from 5 to 1 cent for options listed on 13 underlying stocks. Interactive Brokers is jumping the gun, and in a first for the US options industry, has made penny pricing on options available as of October 24, 2006. Interactive Brokers Group ("IBG") has developed a system to allow customers and liquidity providers to display penny prices in the IB system and to try to trade against other participantsâ penny prices displayed in the IB system. IB will attempt to match penny-priced bids and offers and send them to an option exchange for execution: If you want to post an options price in pennies for other IB users to try to trade against, you can send an order to IB priced in a penny increment (e.g., buy 10 XYZ contracts at $2.07). The order will be treated as a discretionary order, as follows: IB will round the order (down for a bid and up for an offer) to the nearest nickel increment (or dime depending on the premium) and send the nickel-priced order to an options exchange so that it will be working (in this example, IB will send an order to an exchange to buy 10 XYZ at $2.05). Then, unless you instruct us to hide your penny price, IB will also display your penny price (with size) on the public IB website and through the IB Trader Workstation (if your price is the best price in our system). Your penny price displayed on the IB website and TWS is an indication of interest to others that you are willing to trade at a more aggressive price (e.g. bidding $2.07) than the nickel-priced order being displayed in the national options market (e.g., bidding $2.05). If another participant in the system sends an order that can be matched against your penny price (a contra-side order), IB will attempt to execute a trade at a U.S. options exchange using one of the available penny auction pricing mechanisms (such as the Price Improvement Period auction on the Boston Options Exchange or the Price Improvement Mechanism on the International Securities Exchange). During the penny auction process that takes place at the exchange, your order may be executed in whole or in part against the contra-side order at a price no worse for you than the price you specified (i.e., your order to buy 10 contracts at $2.07 will not be executed at a price higher than $2.07 but may be executed at a lower price depending on the contra-side order and depending on what happens during the auction). Of course, you may not trade at all if during the auction process another participant posts a higher-priced bid (e.g., $2.08). Auctions typically last for three seconds and after this time we will report an execution back to you (if your order was executed) or if we were unable fully to execute your order we will re-display your penny indication (if your price is the best price in our system). As an IB customer, you will also be able to send orders in to try to trade against penny prices displayed by others in the IB system. In that case you may have the opportunity to trade at a better price than the nickel or dime prices displayed in the national options market if someone else on the system has indicated that they are willing to give you a better price. To make the system more attractive, professional liquidity providers such as IBâs affiliate Timber Hill (one of the largest U.S. options market makers) and others will be able to post penny indications in the system for you to trade against, and will also have the opportunity to hit penny bids and lift penny offers that you submit. Available penny-priced options may be viewed on our Penny-Priced Options webpage during US options market hours. To trade penny-priced options log into the Trader Workstation (you must have version 864). For information on entering penny price option orders or viewing available penny-priced options through our scanner, see our Users' Guide.
So far, spreads seem worse to me. QQQQ options that usually had a .05 bid/ask spread are now at .08. I've not actually traded any yet, so maybe there's a better chance of getting hit in the middle of the spread?