Placed about 10 orders today with IB penny option pricing in the last half hour with some active options. They were all routed to BOX. Although BOX has price improvement, it seems to me that a normal order routed via ISE will get better fills for overnight orders (where it's my understanding retail traders get priority in line), and without sacraficing anything from the price. Will the visibility to fellow IB traders of your penny orders make up for the difference? I would also like to verify that if you are the first bidder in the auction, (e.g. to buy QQQQ option at $.71), and Timber Hill matches you, if you get priority like in any normal auction.
This just came from IB email: "To make the system more attractive, professional liquidity providers such as IBâs affiliate Timber Hill (one of the largest U.S. options market makers) and others will be able to post penny indications in the system for you to trade against, and will also have the opportunity to hit penny bids and lift penny offers that you submit."
Out of my 10 or so orders that we placed yesterday, two orders went through today, one for 37 options, and the other for 24 options. Only then I realized the cost of the trade is NOT $.75 per option, rather $1.50 per option!! Many people, include me, did not understand this. If I was to sell the options now and for a penny cheaper than the bid, that gobbles the whole $.05 away from the profit. Oh well. I saw one guy bidding one cent below the ask price, thinking he'd strike gold if it goes through, when really he will almost be paying the same cost as if he just bought at ask.
Can you explain this again (use small words so I can follow it please )? Why are you being charged a higher commission for a penny option trade? SSB
today i hit the bid [to close] on aapl 80 calls and price was 3.30/3.40. got out @3.37, that was nice.
Perhaps Option Trader never noticed that you pay to buy and you pay to sell. $0.75 + $0.75 = $1.50. It is the rest of the comment that is confusing. If you gross $0.05 on a single contract that is really $0.05 times 100 or $5.00. $5 less $1.50 equals $3.50. If you just gross $0.02 ($2.00) you are still profitable. Still seems like a good deal to me. Jack
Just as I've heard about people complaining when their money manager made too much money for them (their complaint was that they now had to pay taxes on their profits) I bet this will bring some IB critics out of the woodwork to complain about how they're not getting round number fills and they need to remove hard coding in their API applications. Better fills are better fills....period. Thanks IB!
I mean exactly what I said. IB's rates are $.75 for smart route, and $1.50 for direct routing. IB has had the price improvement function already a long time i.e. that you can enter a price improvement auction via BOX--only you then pay the direct routing rate of $1.50. In this penny option innovation, my understanding had been that since you are using smart route and not direct route, you get charged only $.75. But that is not what happens; rather $1.50 is the rate on each side of the trade, totalling $3 (aside from the penny or more you give up on the buy and sell side of the trade). No assumption making, if anyone's who has experienced anything different, please share.