Do many of you leg into spreads or do you submit it as spread order? If you leg, do you do the longs first so you don't get whacked on the margin & exposure of a naked position? Thanks.
Both, but it is much slower for execution for the combined order. I have never had much trouble legging in. Do the long first and if you want to shave some off it seems better to get it on the buy side rather than the sell. Some of the option oriented brokerage firms have a recommended entry for combined spreads which gives a good idea of your target if you decide to leg in. Good luck!
How about always leg in and leg in less liquid security first. Why not? You mean leg in liquid security first? Thanks.
Fan: I always leg as there is, of course, a chance to put on the spread at a better price. If you are using IB, the spreads are only available on ISE (at least as far as I can tell) Often times this will not be the best price available.
I just opened an IB account. I noticed that about ISE for spreads.. I thought tha't pretty weird. I also have a Thinkorswim account. Their spreads regularly go to the CBOE.
But how can even the realtively sophisticated investor notice that an option is mispriced. It seems like you need some pretty exceptional experience and proprietary software to be able to beat the MM's and arbs at their own game. A friend of mine who used trade options for J.P. Morgan said that qute a few times when an option's price would look out of whack, there was a reason for it and the market would be proven right. If I'm wrong and there is a way to at least being to approach this level of understanding where one can evaluate an option's price and say it's mispriced I'm all ears.