With pennies, bettering the given market is not rewarded. I've bid a penny in front of the existing bid a few times (markets about 4 cents wide on average), and the market makers have a program that automatically goes a penny ahead of my bid. The options market makers have found a way to make you pay the offer and hit the bid.
he he he....If only that were true!!! In any event, "making" you hit the bid and lift the offer in a two or three-cent wide market is hardly the end of the world. I feel for these market makers. Options liquidity providers have been taken to the cleaners in recent years, so I won't begrudge them a cent or two.
You can use this to your advantage, though it works much better foir options on futures and SSF's, where there are no explicit cancel fees. If you are trying to buy, offer a penny less than the market maker. If he (or his bot) is awake, he will often jump your offer by a penny. Now cancel and replace your offer two cents better. He may jump you again. Then cancel your offer and lift his offer in two nearly simultaneous mouse clicks. For futures options and SSF's with wide spreads, you can often move the market maker's bid or offer to the original midpoint. Or even beyond the midpoint if the midpoint was off the implied vol surface. It sometimes takes a few minutes of activity (entering and canceling bids and offers) before the market maker or his bot wakes up and starts reacting. You can also use this technique to protect a bid as the market maker will not offer down below a certain distance, typically about half the original spread, from his offer. Go through the procedure above and move the mm's offer down near the middle. Then place your bid. In cases where the same mm is on both sides, he will not then jump youir bid. Pay attention to this one -- if the market moves quickly the one-penny-worse offer you are using to pin the mm's offer in the middle may get picked off and you will end up short instead of long. .
Anyone trading qqqq options want to comment on fills since going to pennies? I am almost shocked at those spreads.:eek:
======================= Yes, on penny priced QQQQ,SPY very , very liquid on exits. However for the trader who likes to buy cheap calls or cheap puts-near the money-[if there is such a thing LOL] ; partial fills are quite common on entry of 5-20 contracts. However cant really blame the market makers/exchanges ; i dont work too cheaply myself. Besides; Plenty of liquidty in ES & not near the decay cool:
Hey Murrat T T. Partial fills are probably not coming from market makers, rather individuals. You've got 20 to buy, an investor sells you an 8-lot - good for him - partially good for you. I think pennies might force orders like yours to step up a little at the end of day to avoid partial fills. If not, additional market risk or additional ticket charges tomorrow for those paying them. kny 3