I trade options with Interactive Brokers and been seeing some strange execution behavior. Can someone with more knowledge and experience explain if this is legitimate? I had an order to buy a FOTM SPX option for $0.05. Mine was the highest bid and the only order. Yet, after a couple of hours, there was a trade for $0.03 and my order was not executed. I called IB about this and was told that the trade for $0.03 was part of a spread order and that is why someone else' trade got executed while mine did not (even though I had a higher bid for it). Is this legitimate? Doesn't the NBBO require my trade to be executed ahead of the other order since mine had a higher bid even for spread trades? Any input appreciated. Thanks.
No NBBO on SPX since its a single listed option. They technically should not have printed that leg of the spread through your bid but by the letter of the law they can
I experienced this when trading SPX options with Brown & Co years ago. Their compliance officer explained to me that spread orders can trade through a posted bid. I couldn't believe it so I confirmed this with the cboe. You can request time and sales from cboe to confirm that the trade at 0.03 was indeed one leg of a spread.
IB does not need to know. When the spread is executed on the CBOE its gets posted to the tape as a "spread" and therefore since the SPX is a single listed option the prices of the individuals on the spread can trade through. ITs not an IB issue thats the way the market on single listed options works
I noticed this a lot. Spread orders can really distort the B/A and individual legs of the same spread order can be entered at much difference fill prices.
its a spread so it does not distort anything, only the net price of the spread matters and on a NBBO option they're not going to print through other orders
The trade price, although part of a spread trade, does show for the last price, which does skew the bid/ask for that particular strike price.
Does anyone know if the CBOE or other option exchange qualifies it's time and sales records to indicate a spread trade ? I never bothered to check this out.