How to place a large order in a low open interest issue?

Discussion in 'Options' started by crimony, Sep 10, 2003.

  1. crimony


    I am considering purchasing leap calls in volume (@ 1,000 contracts). The current open interest for the call is 47. Any thoughts on who the best broker would be for the transaction? Also, what would be the best way to place the order? What are my chances of getting filled with an AON limit order at the ask? Do any brokers negotiate with the MM on such orders? Thanks.
  2. vega


    Is the open interest bigger in another other strikes close to the strike that you are looking at ? If for example, the Jan 05 40 call has open interest of 1000, the 45 call has 40, and the 50 call has 2000, there shouldn't be that big of a problem as the MM will lay off the risk from selling you the 45s against the 40s or 50s they may already be long. Also, check and see if the corresponding puts have any open interest. I can't really recommend a good broker for this, but some others here may be able to help you out. In addition, make sure that you look at all of the exchanges for the open interest, sometimes you see open interest but it may only be for one exchange, not combined. Hope this helps.


    I don't know if the MMs are going to care for the old AON routine, but you could also consider trying to put on the position over more than one trade--however if there is not a lot of liquidity in those options the MMs will know what your trying to do and fade the market against you. I'd be happy to take a quick look for you if you want to mention the options you're considering, but I understand if you want to keep that confidential as well.

  3. What are my chances of getting filled with an AON limit order at the ask?

    slim to none.
  4. crimony


    So what are my... options? Is such a transaction (at the ask) impossible? Does anybody have experience in this area?
  5. vega


    If your talking about a stock that people are familiar with, say a GE, MSFT, INTC, there shouldn't be a problem getting off most (if not all) of the order the first time, but something that doesn't really trade will force you to pay up and break up your position into several different trades to acquire the entire position

  6. call a big company that makes options liks goldman or morgan stanley and have them structure it for you if you really want to get it done.
  7. damir00

    damir00 Guest

    start a rumor.
  8. with only 47 open interest i doubt its a big company like that.
  9. vega


    I was just thinking it could be the bastard option that no one trades, for example if the 35s,40s, and 50s have decent open interest but the 45s dont--that kind of thing. I know that it is unlikely that it would be a company of that kind of size, but I would think that even if it is a small piece-o-crap stock that the MMs are obligated to at least being 50-up, and there's probably at least 4-5 MMs trading each security so he should be able to get filled using 4-5 orders max.

  10. yes if he is willing to break it up.dont see why he has to fill all at once unless he "knows" something.
    #10     Sep 10, 2003