Getting In and Out with Level II

Discussion in 'Options' started by Friedcat, Nov 13, 2012.

  1. Friedcat

    Friedcat

    Determination of what to trade and price to trade is not a problem. Getting in and out of the trade in options is a little grey. Please assume these questions apply to intraday trades.

    First - Watching level II I see the Bid and Ask moving up and down, together, as the stock PPS moves. I assume that a computer somewhere is moving these Bid and Ask prices with the market but all this movement and very few trades! Please help me understand the behind-the-scene action here. If I enter an order the order is fixed and maybe (stock at least) has a limit option. If I place an order at the Ask I expect it to be executed.

    Second - suppose I want to buy to open 100 contracts. Do I need to match my size with individual marketmakers or if 4 marketmakers collectively have the size I want, at the same price, will the broker split the order between the marketmakers?

    Third - and most important - exit from a long position (either Call or Put). If I want to sell to close 100 contracts and collectively the marketmakers have sufficient quantity, will the broker split the sell between the marketmakers? If I have to match the Bid size in order to get executed then this becomes a little problematic.

    How does an order for 1800 contracts get executed with little if any impact on the option price?

    What I notice different about options is there is a lot of talk (level II) but little action.

    There is little, if anything, on the web about market execution.

    Thanks for any help you can provide.