Hello , I have a question about option fill price. I wanted to buy a call ASK price was $1.2 MID price was $1.05 BID price was $0.95 I can't remember how much volume or open int. there was but it was a logitech option. I think it had pretty low volume. So I placed a LMT buy order for $0.95 but it wasn't filled Right away I started to move up my price to $0.98 etc . until it reached ASK $1.2 My order was filled at $0.96 How is that possible? I thought I would end up paying $1.2 Thank you .
Market Maker scan orders for an edge vs their values. They found enough profit in the order to trade with you. Your process to find liquidity is what I would do too.
There also was no movement of the underlying stock during my bidding or shortly after I was filled. How often do you see this kind fills? I still don't get how was this allowed to happen with all automated trading MM use. It almost looks like a programming bug as they basically gave up $24 a contract.
spot might have moved. Or an offer might have come in for 96 cents and you got preferential treatment to fill it.
I see this happen from time to time with my orders. MM's have no interest in selling me at one price, and when I raise my bid, I am filled at a lower price, just as what happened in your case. It may be because of AIM (automated improvement mechanism). Depending on how the order is handled, if it goes through the auction system, you may get the better price.
What happened is your order was executed as you matched the ask price. The price you actually, pay for it would depend on the ask price at the time. It is quite possible that a seller next in line lowered his ask price to match the bid price. So, you got lucky. I would be more than happy to get filled at favorable prices. Most times, you get the worst of it as the bid price gets lowered when you are trying to sell your option to close it. Or the ask price keeps getting raised as you try and buy that option.
Lucky you got filled at the bid for a buy. The way I see it, it could be due to delay in reporting the trade. It might have already been filled at 0.96 but it just wasn't reported to you right away so you didn't know and kept increasing the price but in reality it might have been already filled. If the mm was really looking to maximize profit, it would've filled you at 1.2 and then turn around and sell it at 0.95. Wouldn't make sense to fill you at 0.96 when you already increased your bid to 1.2 unless he was lagging on his end as well and didn't see your increased bid?
It is not uncommon for an option to trade - when the underlying order is unchanged and the underlying itself is unchanged. The MM trades the resting our to get the hedge for a more substantial trade. Keep in mind with a possible b/a on 16 venues the trigger trade doesn't even need to occur where your option sits. The market in equity options is so fragmented in equity options that no venue regularly breaks more than 10% of the overall volume. So that a resting trade on exchange #1 can end up being triggered by an order on exchange #10.
%% LOL; like the floor traders say ''no such thing a as a cheap option.'' NO need for stock movement\ see my first sentence. NO such thing as a dumb market maker/specialist also[Gave up 24/LOL\ not on that bid ask spread] Cheap comissions compared to bid\ ask REALTY