broken trades when trading options

Discussion in 'Options' started by flipmode, Apr 22, 2008.

  1. flipmode


    As an equity trader, I was hit by broken trades serveral times. Are broken trades also possible when trading options ?

    For example, if you are liquidating a call option after buying it, could you get a call from your broker, telling you, the first buy execution was busted and you're now short. So the liquidation was some kind of "writing a call option" event ?

    Sorry, if the question is too stupid, but I'm an option beginner and just want to find all hidden traps before getting involved.
  2. Since nobody else answered I'll contribute what little I know.

    Yes, options trades can be broken and they can leave you net short as in your example.

    The good news is that this has happened to me only once about 8 years ago. My broker automatically resubmitted the order and fortunately the market had then moved in my favor and I actually got a better price.

    It's an outrageous practice that is apparently legal.

    I assume nothing has changed and option trades can still be broken.

  3. There would have to be a pretty good reason for a trade to get busted. If they called and told you a trade was busted and that trade occured on or in the NBBO they would have a pretty hard time busting the trade. If you get a fill thats outside the NBBO and in your favor there is a chance, a small chance it could be busted but its highly unlikely.

    If you entered the order properly and its in the NBBO calculation and linkage and there were no current issues with the NBBO claculation and linkage they really cant do much, to bust a trade.