I have been trading options for some time now. I have had mixed success during this journey. My go to strategy is butterfly trades based on index options such as NDX, SPX and RUT because of their cash settlement and no risk of early assignment. For various reasons, I have changed brokers quite a few times during my trading endeavor. My most recent brokerage is Charles Schwab. The platform is great, customer service is really good, and commissions are very reasonable and in line with industry standards. However, one big issue I am having, is closing my butterfly trades, or achieving a fill at mid price more specifically. Often times I won't get filled at mid on entry at all, the order will just sit working. But whenever I do get filled, I simply cannot exit my trades. Many of which are extremely profitable. I can open these butterfly trades on NDX at mid price, for as little as one penny debit per trade. So I only have $1 dollar risk per contract. One would assume with indexes, it's not a liquidity issue. Usually my trades are either ATM or slightly ITM, but sometimes they are deep ITM. I am only trading a handful of contracts at a time. Because I am trading cash settled products, when they expire I simply lose the debit I paid to initiate the trade. Any advice on this issue? I have attached a screenshot of my most recent winning trade on NDX, with a huge percentage profit, that for love nor money I cannot exit at my limit price no matter what I do. Thanks for any insight
We've had this discussion before. You went from DITM calendars to flies. You're showing a favorable change in mark which is not really marketable. You intentionally fail to show the legs of the position bc we could then look at the marketable price of the spread. You're sitting there waiting for the quotes to go stale to prove your point. Nobody is going to fill you at your fantasy limits. Show the fly legs. Of course you will not.
The vast majority of your fills with be with a MM. They trade with what I refer to as an electronic eye. It is 100% automated. They will only trade with you if they get their edge. Mid-point works if the index moves. Also, the mid-point might not be their fair value, as it can be offset with customer orders. So ask CS if your option spread orders go to an broker to handle or the COB on the CBOE. If the COB on the CBOE, you will need to be more aggressive to exit, so a MM want to do the other side.
I did manage once to get filled on a NDX diagonal spread for around 16,000% profit. I entered for $1 risk and closed for $164. However I will in fact post a screenshot of the legs on this particular trade. I have no problem doing that as I genuinely do not understand why a market maker would not fill at mid price for such liquid options. Screenshot to follow.
You did not turn 1 into 164 because the diagonal width is added to the spread requirement. Let's see the spread.
Thank you for your insight Robert. Yes I believe Schwab send spread orders directly to the exchange complex order book. Of course that is actually my main concern, in terms of what a market maker considers an acceptable edge. It seems to me some orders can never be filled on exit, unless taking a guaranteed loss.
This is a screenshot of my NDX trade, showing the legs of the November 29th expiry. Strikes 16,800, 17,000 and 17,200. You can see both mid and natural price here.
I told you before... those legs are not liquid. The 16800-17200 call fly is = to the 16800-17200 put fly. What happened to your gain?! You wait for a leg to go stale for a few seconds and equate that to a marketable price. IT_IS_NOT. Just because you wait for the thing to show a gain and quickly screenshot it. Nobody is going to let you out of these DITM flies better than 0. Price the put fly at the same strikes. That's where price is. The reason that stuff closer to the market typically won't fill is because you'll see a stale leg in the wing at say a dime (0 x 10 mkt) which overstates the arithmetic mid bc the spread is valuing the wing at a nickel. It's not a true marketable spread so you'll have to move your limit accordingly. Not what we're talking about here. What you're doing is profoundly ignorant bc you're intentionally dealing with an ITM spread with legs worth $400K each and the var on the legs as the MMer bot updates the quotes with movement in cash (well, really the futures). TL;DR? Trade the put spread in those strikes and you will have no trouble. You'll never make anything but at least you won't be deluding yourself.