I just did my first trade with IB. It was a combo (iron condor), buy limit order below the ask. I ended up paying the full $0.70 plus fees commission with no rebates. So does this mean: - a non-marketable limit order is not considered as adding liquidity if it's a combo? - is there a way to trade a combo and get a liquidity rebate? - is it worth it?
Not sure what you mean by doing an iron condor below the ask. That is a four leg combo and you will end up paying full price for each leg. As far as I know you won't get the liquidity rebate on combo orders. If you want to try to work your way into it one leg at a time you might be able to get the rebates.
Below the ask I mean that before I buy TWS shows a composite quote for the combo. The ask of that is what I'd get if bought both long legs at the ask and sold both short legs at the bid. In case of a condor it's a negative value since it's a net credit. I set the limit lower than that ask (higher absolute value = want more credit). My understanding is for a plain single-product trade a limit buy below the ask becomes the new market bid and sits there (adds liquidity) until someone comes in and sells to me at that bid (takes liquidity). Things are less clear when it's a combo, but I still thought if the limit is below the (composite) ask, then at least one of the legs would trade as a limit order mid-market and add liquidity. Today I tried another trade, a vertical this time, as a REL+LMT order. With that one I did get a liquidity rebate. But then another REL+LMT mid-market order for a vertical got no rebate. I'd really appreciate if someone could clarify how this works or point out where my thinking is wrong. Thanks!
I don't usually do such complex combo's at IB... but if I do any combo at IB I look at the combo quote and attempt to get a better price by doing one leg at a time trying to better the combo quote. To do this you have to spend a lot of time watching the execution... which is why I usually do them at my option broker (OptionsXpress) whom I trust to optimize execution (more or less).
I am not sure exactly how IB deals with the combo orders except to say that you will usually pay retail on all legs. I don't think the public ever sees the order unless they are looking at the complex order book. I think you are usually filled by a MM on these orders and usually at the ISE. When you are trying to post a midpoint order on the combo, the legs are not separate resting orders, but one combo order on the complex order book (if IB even posts it there). Legging in yourself will get you what you are looking for, but takes a lot more skill. Hope that helps.