Does anybody know why the spreads of OEX index options vs. SPX index options are much narrower? They are both single listed but it looks like the OEX are easier to trade for (small) retail investors compared with SPX. Thanks, FT79
One theory would be that it is more difficult to track the larger index. However, that is not true for RUT or IWM options, so that is probably an incorrect theory. Also, the ES options don't have the problem either. One thing to look at is the spread in XSP options, or the mini versions of the SPX: http://www.cboe.com/micro/xsp/introduction.aspx nitro
While ES option spreads may be 50% smaller, its important to remember that SPX options have 2x the leverage of ES options. So, delta wise, its not that big a difference.
Doesnt your broker have some 'order filling brokers' in the SPX pit? Cant you just call your broker, ask for a quote...he'll then call the floor, get the real time quote/market, then he gives that information back too you....then you make a trading decision (or give him an order to work)? I use to know a handful of filling brokers at the CBOT, thats what they would do (they would be wearing headsets) and the customers would just directly call them, give the orders, and you could actually hear (via the headset hes wearing) thats hes working/filling your order. I always thought thats how the whole process worked....then again those guys were filling Larger paper orders....trading 2-5 contracts, now that may be a different story...
Having traded orders with hundreds of contracts for my own account and thousands of contracts professionally in the SPX, I can tell you that the market makers are simply stealing as much as they can for as long as they can. Even with large orders you never get a "good" price, you can only hope for a reasonable fill. There are ways to get better prices, but they do not pertain to your current size. My advice for a small trader is look to another index like the NDX.
The OEX trade on a hybrid's system that has more electronic market makers and less pit traders (last time I was there in mid-August they had about 15, when it wasn't on the hybrid system there were 300). Supposedly the SPX pit was supposed to go towards a hybrid system this month, but not sure if thats delayed or not. Ever think of trading the XSP, the mini-SPX that has narrower spreads and 10 point contract intervals vs. 5 with SPX. Might be better until the SPX goes hybrid.
SPX went hybrid 2 days ago (9/25/07). Its apparently a watered down version of hybrid- http://www.cboe.org/publish/RegCir/RG07-097.pdf. I can discern no difference so far- spreads are still large, orders placed between posted bid and ask are still outcried and only 1 MM is allowed to stream quotes- the rest still must post them manually. I hear the main difference is for MMs who now have full electronic access to the order book where in the past those executions against book orders would be outcried to the person running the book. (credit to nitro for MM and book info)
Price improvement on NDX options is often available, probably as a result of competition. Since NDX options are listed electronically on multiple exchanges, and some trading floors make quality markets for large orders, everybody competes for your order based on execution price. Pre-trade, real time, verbal quotes often give you the best opportunity for price improvement, especially for large size, or spread orders. As with SPX, the minimum order size at IB for broker assisted quotes and trades is 100 contracts per leg.
You know what I've noticed, my SPX orders are better filled during the 3:00 to 3:15pm end of the session. I put a credit spread on last week, and it was about 10 cents above the midpoint (good for my direction) and got filled within a minute. Probably the MMs wanting to get out of some positions.