I am not going to provide you any proof. You are welcome to take this piece and trade better or do nothing. I am not here to cajole you into my corner. What happens in real life, it is not on the books. This is a practical hands on experience, not read from a book or conceived from a Phd thesis. It comes from years of digging trenches and losing money and making it successfully.
Here is another technique you can successfully employ: Do not trade the SPX electronically as a retail customer. This big contract is for big institutional traders who have access to the trading floor. However, if you insist on trading this contract, I am sure that the traders on the floor will be happy to take your money. You can rest assured that the CBOE SPX market-makers are not giving up any edge to you.
you can trade stocks that replicate the index with decent ratio's....spreads are no bueno on spx...but homebuilders, oil stocks, replicate the index with a 3-1, 4-1 ratio...I tried to spread the spx for a while now...out of hope. Doesn't work. DHI, KBH, CFC...great stocks to trade. Anybody disagree? PS....I know about the critics on the site but im looking for positive info
I agree SPX is not a vehicle anyone should trade for all the illiquidity created by these greedy market makers who would hold you hostage on an expiration day, and zing your ears back. But nevertheless this tactic is a powerful tool in the hands of a retail investor, use it when you need to. Don't be afraid to hammer your way in or out. Good Luck.
Exactly. While this technique may work to get filled, it would be silly to imagine that it forces the MMs to take trades they don't want.
You sure about that, You are giving the mm the edge every single time you take an options trade on SPX with those huge spreads.
Its called the law of nature. A market maker on CBOE is lot more greedier than a market maker on say RUT, NDX or SPY, IWM. He is surrounded by a fortified moat that CBOE has built around itself. Its impossible to penetrate that moat. While you go begging to trade his product you are giving this greedy individual a chance to dictate you his abusive practice of wide bid and asks while he slurps happily at your undertakings. He knows you will come back trying to close this spread he is going to polish you again. Its an abusive business practice. Best strategy is stop trading SPX. These kings in the castle will drown in thier own moats. If you still have to trade SPX hammer them like I do, don't be afraid to place lower than mid prices, you are this point throwing a monkey wrench in his set up, he will deal with you fast and get you filled (at your terms). Its call negotiating a wide bid and ask with a stick. Good Luck
So let me get this right, you are proclaiming to be the expert god in options trading and that anyone else (retail or working on a derivatives desk like I do) are just plain wrong? Read these: https://www.cboe.org/publish/DisDecision/07-0049.pdf "(d) Thirty Seconds Rule. Each responsible broker or dealer within thirty seconds from receiving an order that is greater than the quotation size established by paragraph (c) of this rule must: (1) Execute the entire order; or (2) (i) Execute that portion of the order equal to at least the quotation size established by paragraph (c) of this rule; and (ii) Revise its bid or offer. " ...and... "(6) No responsible broker or dealer shall be obligated to execute a transaction for any listed option as provided in paragraph (b) of this rule 1 when: (i) Revised Quotation Size (A) Prior to the presentation of an order to sell (buy), a responsible broker or dealer has communicated to the exchange, a revised quotation size; or (B) At the time an order to sell (buy) is presented, a responsible broker or dealer is in the process of effecting a transaction in such series of option, and immediately after the completion of such transaction, it communicates to the exchange a revised quotation size, such responsible broker or dealer shall not be obligated by paragraphs (b), or (d) of this Rule to sell (buy) that option in an amount greater than such revised quotation size. (ii) Revised Bid or Offer (A) Before the order sought to be executed is presented, a responsible broker or dealer has communicated to the exchange, a revised bid or offer; or (B) At the time the order sought to be executed is presented, a responsible broker or dealer is in the process of effecting a transaction in such series of option, and, immediately after the completion of such transaction, a responsible broker or dealer communicates to the exchange, a revised bid or offer; provided, however, that the responsible broker or dealer shall nonetheless be obligated to execute any such order as provided in paragraph (b) of this rule at its revised bid or offer in any amount up to its published quotation size or revised quotation size." If you have a problem with the way it's working at the CBOE, then why don't you do this: Rule 9.23. Customer Complaints Every member organization conducting a non-member customer business shall make and keep current a separate central log, index or other file for all options-related complaints, through which these complaints can easily be identified and retrieved. The term "options-related complaint" shall mean any written statement by a customer or person acting on behalf of a customer alleging a grievance arising out of or in connection with listed options. The central file shall be located at the principal place of business of the member organization or such other principal office as shall be designated by the member organization. At a minimum, the central file shall include: (i) identification of complainant, (ii) date complaint was received, (iii) identification of Registered Representative servicing the account, (iv) a general description of the matter complained of, and (v) a record of what action, if any, has been taken by the member organization with respect to the complaint. Each options-related complaint received by a branch office of a member organization shall be forwarded to the office in which the separate, central file is located not later than 30 days after receipt by the branch office. A copy of every options-related complaint shall be maintained at the branch office that is the subject of the complaint.
Oh. And, these are the RULES. Understand the rules for the f'in instrument you trade. The RULES are not some stupid Ph.D document, all of the "real world" experience is derived from the rules (we just tend to bend them a bit).