Options Fills on Bid/Ask Spreads

Discussion in 'Options' started by EliteTraderNYC, Feb 29, 2012.

  1. Hey guys, do you get fills on wide bid/ask options spreads or no where do you get the fills? I.E', must you take the bid ask or do you get something better. Just wondering.
     
  2. I like how you ask a lot of questions and never offer anything back.
     
  3. Come on,

    give the guy a break. He's just starting out.

    Although the title- EliteTraderNYC does sound very "the Situation" like from the Jersey Shore- would have helped if he was already a member of the Gurkha squadron of traders.
     
  4. Is he? All he's does is ask one question after another and doesn't engage in much dialog.
     
  5. I would be an elite trader except that I watch all my options orders just sit there not getting executed.
     
  6. On that note, here's a new member:

    I'm not tryna make fun of anyone. I'm a newbie too- with some amount of experience but nonetheless years of experience to gain. It's just that some of these handles seem like they are coming straight out of playing Call Of Duty and somehow registering for ET
     
  7. And to answer your question:

    Never buy on ask on sell on the bid if the spread is too wide. Always try to see if you can squeeze in a few points here and there- most brokers' software allows you to do that- especially if they allow spread trades.

    Example of an OTM Call vertical:

    Strike: 50- Bid: 2.55_____Ask: 2.75
    Strike: 55- Bid: 1.25_____Ask: 1.40

    You wanna sell the vertical: Sell the Strike 50 bid and Buy the Strike 55 Ask

    If you do it on NBBO you get a credit of 2.55-1.40=1.15

    But, if you do a mid-price- you get 2.65- 1.35= 1.30

    Notice, for the 55 Strike, the mid-price of 1.25 and 1.40 is 1.325=~1.33.

    But sometimes it is impossible to get a fill at such weird mid prices. So if it is "mission critical", go with a slightly lower bound and accept a lower price if you're selling (or higher if you're buying) so you get quicker fills. In this case, you chose to go for 5 cents less on the ask.

    Sometimes that makes a huge difference of 0.50 cents or more when markets are going crazy and not all options are seeing volume and thus you can get lucky.

    Hope that helps. I trade with IB and have nothing but praise for its execution. So it also depends on your brokah! I deal with this bid-ask issue everyday.

    The more experienced guys here could probably add to this?
     
  8. Perhaps he put the "Elite" in NYC? A
    big thumbs up for that :)
     
  9. instead of splitting the b/a i usually have to go a few ticks closer to the offer to buy - if i still don't get done i just move on b/c i'm not going to lose 20% getting in and out.
     
  10. TskTsk

    TskTsk

    I continously track the midpoint and I almost always get filled at midpoint if I wait a little bit. However you're going to take unwanted exposure while waiting to put on the entire position, so it may or may not be worth it.
     
    #10     Mar 1, 2012