I spoke with market regulation at the CBOE. "Customers" are restricted from two sided order flow to open because customer orders have priority to members. It also applies to the complex order book for the same reason. However, you can open/close. So if you're bidding 1.00 for 100 spreads, you can't offer anywhere. If you buy 30 at 1.00, leaves 70 on the bid, you can offer the spread out 30 times to close at the price you choose. I hope this helps.
In a spread in a stock like aapl, if you believed the spread was worth 1.25, and the bid/ask on the screen is 1.00/1.50, would you want to bid 1.05 and sell out what you bought at 1.40, while still bidding 1.05? That's why. Also, with spreads entered as one order, there is no slippage.
Thanks so much for your help. As always, it is a great pleasure to read your professional responses. Does the open/close exception apply also to complex orders or only to single orders?
If my account is labeled "professional customer" am I also subject to these "two sided order" limitations since I am still considered a "public customer"? Or in this situation there are no such limitations?
Different exchanges have different rules for pro cust. Most exchanges allow two sided orders but charge $0.20 for exchange fees rather than $0.00. You can call me tomorrow if you need more information.
You could achieve it by placing asell to close order on the call spread and place a buy to open on the equivalent put spread. Yeh, I know, four legs instead of two
Only options and option spreads because if your making two sided markets at the exchange, your order goes in front of the market makers. So, if your simulating market making as customer, they want you to pay extra as pro cust. This might also put you on parity with the MM rather than in front.