GLOBEX option spreads with IB

Discussion in 'Options' started by TraDaToR, Feb 3, 2010.

  1. TraDaToR

    TraDaToR

    Hello,

    How does it come that when I submit a vertical spread on ES for example with IB, my order doesn't appear in the B/A spread ( as a new bid or ask)? Vertical spreads are defined contracts on globex( with matching priority ) but it seems that displayed B/A spread is just ( Timber Hill ) implied prices.

    Can someone from IB tell me if my orders are even submitted on globex as vertical spreads or if they are just combo orders that would only fill if MMs implieds reach my price?

    Thanks a lot.
     
  2. ids

    ids Interactive Brokers

    Yes, it is a combo order. We do not offer spreads.
     
  3. TraDaToR

    TraDaToR

    Thanks.
     
  4. When you construct the spread/combo and it is user defined and not showing negative numbers, and accepted by globex, it will be a working order when you transmit it. It doesn't show up as a bid/ask though. But, if you hit the bid or ask, it will execute right away. Your order showing up as a bid/ask is no big deal, for you are literally asking MM's to negotiate every leg for you. A suggestion for good execution: start by placing your limit order halfway between the "bid/ask." If you are selling your spread, you may need to inch it closer to the buy for execution. If you are buying a spread, you may need to inch it closer to the ask. I find IB's handling of all simple and complex option spreads very satisfying, for I have tried other brokers and their platforms cannot match IB's.
     
  5. TraDaToR

    TraDaToR

    Thanks jw, but as ids said they don't support spreads as a contract so I cannot compete with MMs. I am not interested in MMs "negociating my legs", which means waiting for my stagnant order to give them an edge . '
     
  6. TraDaToR

    TraDaToR

    On a side note, if it's Timber Hill that shows those uncompetitive implied prices and get executions from their customers removing bid/asks, they can immediately offset/take profit in the real spread market which is not available to their customers. I hope it's not the case.
     
  7. The bid/ask's shown are derived from the actual bid/ask's for each leg, so the playing field is level. Every trader looks at the same bid/ask. Forget about the market maker....by placing our order between the bid/ask, if anyone submits an order opposite your legs, it is executed. I have never had to hit the bid or ask..so "negotiating" your legs all at once is to your advantage. Suffice it to say, I have gotten better executions entering all my legs at once, then trying to leg in.
     
  8. TraDaToR

    TraDaToR

    I'm not sure I understand...I must be an idiot

    Let me give you an example: Let's say 2 different strike options on ES are 2 bid X 3 ask and 4 bid x 5 ask, IB will quote the implied prices of the vertical spread 1 bid x 3 ask ( if I'm right ) but in reality the spread market , which is a different contract/animal on globex with no implied prices( we had a discussion with covered call recently on the subject ) can be narrower like 1.5 bid x 2.5 ask.

    If I have access to the spread market, I will place a new bid at 1.75 and if a sell market order comes in, I will get my fill @1.75. With IB, I have no access to the spread market so if I place a buy @ 1.75 order, I won't get the spread market order and my order will float 'til implied prices of the legs match my order like 1.25 bid x 1.75 ask and 2.5 bid x 3 ask( 1.75 implied ask ).

    Am I right? ... I needed intense reflexion to post this....LOL:D
     
  9. MJ888

    MJ888

    Glad there is a discussion about IB's bid-ask. I have been using IB since 2003 and I am wondering if the bid-ask that I see from IB say for a May CL (crude) option would be the same bid-ask that I see on another company's trading platform. Hopefully it is.....but I am curious.
     
  10. TraDaToR

    TraDaToR

    For a single option, it is the same. For a spread, if the other broker provides the spread market, the quotes would be different IMO.
     
    #10     Feb 4, 2010