block option trades, how to work the order ?

I frequently see 500 or several thousand contracts trades on otherwise very quiet option chains, how does one go to put such a order on the market and have a chance to get it filled ? Any specific advice to those trading with IB ?

Thanks

 

those trade in the inter deal broker market or are "pre-arranged"

""'s because you techncially arent allowed to have pre-arranged transactions in options; but they get around it by putting the 500 lot on the floor and then trading against it a few hours later.

to trade that way, you need to find a counter party who will do it for you - most brokers have floor operations who will work such an order for you.

 

What do you mean by trading against it...

 

Thanks for your reply. Do you mean i'd need to find a counterparty before sending the order to the broker or the broker would look for the counterparty ? I see also large block trades in low volume small cap stocks, I thought the brokers would look for the counterparty, am I mistaken ? Also is a broker like IB suitable in such a case ? Could you advise any other broker that might be more suitable, but also offer international markets and decent rates (IB is actually quite expensive in some markets, especially with the per share pricing but I can't spread my capital between many brokers if I want to keep sufficient purchasing power. Two brokers would be the maximum)

 

Also anyone using the advance order types from IB to place large option orders, starting with the Block order or request quote ?

https://www.interactivebrokers.com/en/?f=/en/trading/orders/block.php

https://www.interactivebrokers.com/en/?f=/en/trading/orders/rfq.php

 

wait there, then when offered a big lot,
hit it with a little off-of-thebid price.
for example, if offered at 0.9 with size 1000lot,
you want to getout with500lot
hit the bid with 0.88 or0.89, that way those guys can notsneak out.


that is my strategy.

 

another way is using IB's floating rate, take advantage of that.
dump 100lot here or hit 200lot there.

with fixed rate's firm, big lot often end up with several blocks, end up expensively too. use the "lower ball hit" strategy works great to me, though it reduced some profit.

or trade SPY/AAPL only, those options are just like indiviudal stocks. very liquidate.

avoid individual stocks!

 

Thanks Trader198, obviously I don't have volume issue trading ES options, and would be fine with SPY and AAPL. The stocks i'm referring to don't show over 100 contracts on the bid and offer, often less, never 1000. Yet they do show ocasionally block trades.
Besides it cost me more fees and more time but I've been doing much better with individual companies than with indexes - not sure it will last but I try to increase such trades, and possibly switch part of it to option trades.

 

I use at etrade. It works pretty well. Generally these are voice orders.

It's an upstairs market with them calling specific guys who they think have interst. No hft nonsense but also it means your intentions are broadcast everywhere.

 

Thanks for your feedback, I actually tried to follow the instructions of the Quote Request order on TWS but couldn't even find the option to appear ?!? Wonder what I missed and also if it works better when phoning them??