Options Commissions

Discussion in 'Options' started by Algo_Design_Kid, May 13, 2011.

  1. spindr0

    spindr0

    IB allows bids at penny increments on options that trade at 5 ct increments on the exchanges. Also, spread orders are filled between the B/A without the quote going to that price (another party was doing the spread and your fill was part of it). I can't prove anything... I'm just suggesting that there are other possibilities for what you observed.
     
    #31     May 18, 2011
  2. spindr0

    spindr0

    I agree. If you NEED to execute because price is moving against you, you have to execute at market prices. But if you are working an order, better fills can add up to an awful lot over the course of a year. Obtaining a mere nickel on each side of a 10 contract spread once a week is 5 grand a year. Saving more than a nickel and/or doing size is a whole lot more. All I'm saying is blindly placing market orders for every position is not a good idea.

    FWIW, regarding iron condors, I've seen component combos trade 10 or more cts cheaper one entry way versus another. IOW, market the market price for two verticals might be less than that of two strangles (or vice versa). So even just looking at a different combo would have saved a chunk over a blind market order.
     
    #32     May 18, 2011
  3. spindr0

    spindr0

     
    #33     May 18, 2011
  4. rmorse

    rmorse Sponsor


    Most option exchanges charge brokers for net cancellations generated from their firm, if the cancellations reach over a certain level per month. Because IB does not want to pay the fees themselves or decide which clients are creating the excess cancellations, they charge everyone.

    The fees are charge because the excess orders create the need for more bandwidth at the exchange routes.
     
    #34     May 18, 2011
  5. My experience at Ameritrade, confirmed by calling a rep: for each option series, they will route your order to a predetermined exchange. It may have the best price, it may not. It may execute your order anyway, or the order may just sit there, even if another exchange has a matching order at that price. I've personally generated locked or crossed markets with my orders at Ameritrade, when I placed a sell order at the best bid or lower, or a buy order at the best ask. That's right - sometimes my order to sell below the highest bid has not been filled because it has been routed to an exchange with an even lower bid that is apparently not willing or able to let the order go to another exchange. Sometimes in this situation my order would get executed a few seconds later, sometimes the market would remain locked or crossed until the bids/asks changed due to the underlying moving and my order became nonmarketable.
     
    #35     May 18, 2011
  6. One broker I used would never route to BOX - wouldn't even show BOX on the level II display until a couple months after they opened . I traded thousands of SPY contracts, back when the tick size was .05 and the typical spread was .10, and never ever got price improvement. With brokers like IB, I did get price improvement, regularly. Only thing that kept me from moving totally to IB was the cancellation fees - I sometimes trade options with large bid/ask spreads and have to cancel/replace orders a lot.
     
    #36     May 18, 2011
  7. Occam

    Occam

    IB must love this advice -- as their Timber Hill division can (at will) happily trade against you for added profit, and your order never needs see the light of a real market, where it may enjoy much greater "price improvement" than IB is willing to offer.
     
    #37     May 18, 2011
  8. MTE

    MTE

    Using a market order is asking for trouble! If you really want to get in/out then you should use a marketable limit order - i.e. if you are looking to buy an option, which is 1.90 offered then you should use a limit order with a 1.90 limit. This way you would get filled @ market without the risk of getting huge slippage.

    Don't forget that a market order = execute at any price!
     
    #38     May 18, 2011
  9. spindr0

    spindr0

    Are you feeling the love yet? ... for your opinion that one should place market orders instead of limit orders?
     
    #39     May 18, 2011
  10. spindr0

    spindr0

    I don't know the mechanics of option exchange fees and what and when they are passed through to the broker. All I know is that IB provides a credit against them for trades executed and if I have more fills than cancels/modifies, I don't incur them. They list the algorithms at their web site but that's way more than I need to know :)
     
    #40     May 18, 2011