Trading and getting fills with Interactive Brokers

[jr1221]

I was looking at a trade opportunity in OptionTrader today, and at the time of analysis it showed 400 contracts had been traded so far today.  A little bit later, the volume showed 370 contracts.  How in the world does the number of contracts traded in a day actually decrease?  Do they subtract "sell to open" trades from the contract volume or something? 

[ttselva]

I am not sure what type of market data subscriptions are required for trading options with IB for the trades typically done in steady options.  I would appreciate if you could let me know.  Thanks. 

[Guest Hal]

Hi ttselva,

I posted the same question some time ago, and Indiana*Josh provided an excellent answer, along with a screenshot. You can access the thread here: http://steadyoptions.com/forum/topic/1045-ib-subscriptions/#entry17712 - just scroll down for Josh's post and screenshot.

 

Best of luck.

[ttselva]

Hat, Thanks, it was very helpful.

[mike_tee_vee]

Have many people been paying less than $1 on commissions for your recent fills with IB?  For the past month or so, I've noticed that most of my fills are with either $1.07 or $1.52 in commissions. 

 

Last year, it was not uncommon to pay only $0.27.

[indiana*josh]

Have many people been paying less than $1 on commissions for your recent fills with IB?  For the past month or so, I've noticed that most of my fills are with either $1.07 or $1.52 in commissions. 

 

I've been trading SO for 6 weeks on IB.  I've bought/sold 572 contracts for a total commission of $478.26, or approximately 83.6 cents per contract on average.

 

The highest commission was $1.52, and there have been quite a few of $1.22 and $1.07 as well, but also lots of 0.77 and a few lower than that.  Lowest commission was actually a 3 cent credit.

[Kim]

Have many people been paying less than $1 on commissions for your recent fills with IB?  For the past month or so, I've noticed that most of my fills are with either $1.07 or $1.52 in commissions. 

 

Last year, it was not uncommon to pay only $0.27.

If you buy one spread, you will pay $1.00 plus few cents various fees - this is their minimum commission. If it is PSE, it will usually be round 1.50 for one contract. The average should around 75-80 cents if you trade more than one spread. 

[jr1221]

IB users:  I was looking at my "account" window today, and noticed that it shows a "Dividend Receivables" value in a negative amount.  Don't think I've noticed having a number in this field before.  To me, this would imply that I have short options on an underlying that is about to go ex-dividend.  But I looked at all of our current IB positions and doesn't appear any of them are going ex-div anytime soon.  Does anyone know why I might have a negative number in this field?  By the way, this dividend receivable amount also reflects a difference between my "market value" of the account and the "liquidation amount" in the account screen.  Anyone who knows what this all means, I'd appreciate your words of wisdom.

 

Jim

[Marco]

Dividend receivables should be from stocks or ETF's that have gone ex dividend but haven't paid their dividend yet  (IB hasn't received the cash yet) So a negative amount there should come from short positions you had in stock or ETF's. Some stocks pay a div only up to 6 months after they have gone ex so this could be from a short position you had month's ago.

As options don't pay dividends they would not contribute to dividends receivable, positive or negative.

 

The net liquidation value is what you would get if you would close you account today and liquidate (i.e. sell all longs and cover all shorts) at the price that IB values them (should be in theory something like the mid price, in practice that is a different story) if you are owed dividends then you would get these on top of the market value of your portfolio if you owe dividends as you were short something that paid a dividend that will be deducted from the market value of your portfolio to arrived at the net liquidation value.

[jr1221]

Thanks Marco.  I looked deeper into this over the weekend and figured out what happened.  In this particular account, I only trade options so never really put much thought into the impact of dividends on stocks.  However, around May 8th I was in a calendar trade for IBM, and the short legs were early exercised by my broker.  So I woke up that day with 1600 shares of IBM in my account, along with 16 long options from the calendar trade.  What I didn't realize at the time was that the stock apparently went ex-div that day, because I'm now on the hook for the dividend on 1600 shares -- about $1520.  Fortunately IBM rose that day, allowing me to reduce the sting a bit by selling the long options for a nice profit.  But nowhere near enough to cover the dividend I'm on the hook for.    A pretty painful lesson that I should never be short an option on the ex-div date.  Pretty brutal. 

[Saud]

Trying to get a handle on TWS at the same time as getting up to speed on the strategies here is no easy task   but time well invested I think. A very good reason to papertrade until I'm more confident with how everything works, as Kim suggests.

 

A quick question, if anyone knows - does the latest version of mobile TWS for Android still not allow for spreads   I saw mentioned some pages back that the app does not, in which case it would be pretty much useless for our purposes here...

[chanson]

A quick question, if anyone knows - does the latest version of mobile TWS for Android still not allow for spreads I saw mentioned some pages back that the app does not, in which case it would be pretty much useless for our purposes here...

I don't use the Android version so can't answer your question directly, but I wonder whether these rolls are so time-sensitive that you need to execute them as a spread, rather than as a buy followed buy a separate sell. I'd be interested in hearing others' views on that.

[Saud]

Thanks chanson, I'm sure you are right in that case. I did some across a recent user review of the Android app and the latest version seems to have more functionality. In any event, I think it should be possible to set things up in advance in most cases and add the combo to the Quote Monitor for quick access later.

[equus]

Just in the process of opening an IB account.   It's asking whether "Futures Options" is one of the categories we want to trade.

 

Does anyone know if for SO trades we need to select this category?

Edited August 12, 2013 by equus

[Kim]

Yes, for VIX trades.

[Saud]

question...

 

There is no Buy To Open/Sell To Open at IB, only Buy/Sell. So what happens if I wanted to open a new position, part of which overlapped an existing position. For ex, let's say I own Sep 25 Calls as part of an IC or something, but also wanted to open up a new combo such as a calendar which required selling the same Sep 25 Calls. When I select that call to build the combo, the "close position" button lights up. So it's going to be flattened and I would end up with fewer or no Calls in the original IC position. What am I missing here?

[Gary]

As far as I know it's not possible on IB to be both long and short the same contract in the same account. If you are long 10 contracts and you sell 5, then you are "selling to close" 5. If you are long 10 and you sell 15, you are "selling to close" 10 and "selling to open" 5. To me this functionality is desirable as it has the effect of minimizing your commissions.

 

Thus, if your physical position is made up of several logical positions you have to track the logical positions separately (perhaps in a spreadsheet or through TOS thinkback or something).

[Saud]

Thanks Gary. Just a hypothetical for now, I didn't want to be fumbling around if that situation ever arose.

[Kim]

With IB, you have to be careful with those positions offsetting each other. In some cases their software might get confused and calculate the margin incorrectly if you have some positions offsetting each other.

[Saud]

Good to know! On balance, I'm happy with IB's quirks, as it's saved me from making some costly mistakes in the past.

[Yowster]

Quick IB question - I'm opening an account at IB for my options trading to take advantage of the lower commissions (no base fee, only per contract fee) and what I perceive to be better close to mid-point execution based on comments here at SO.  For the "Market Data  Subscriptions" the US Bundle seems to be what I want (fee waived if you have $30 in commissions per month) but I also see another item for "US Options", does anybody know if I need to select anything other than the  US Bundle???

[PaulCao]

Just in the process of opening an IB account.   It's asking whether "Futures Options" is one of the categories we want to trade.

 

Does anyone know if for SO trades we need to select this category?

 

Hi, 

 

Yes. If you want to trade VIX or any commodity futures options (e.g., Gold, Natural Gas, Crude Oil). I think the only one that Kim trades is VIX though, 

 

Best,

PC

[Mikael]

If you guys are sick of IB but want to keep using their order routing and smart execution check out Livevol (but need to have over 35k in your account).

 

it's really awesome and they charge 65c a contract. all the money/execution is handled by IB but the platform is very powerful and customisable. 

 

backtesting and charts suck but that's what you have free ToS paper accounts for

[Marco]

Can you 'switch' ur current IB account into that or do you need to close IB and re open with live vol?

[Mikael]

no you can't, you have to sign up for a new account. BUT you can do a position transfer or cash transfer from IB to IB account. so it's not so complicated actually. going through the process myself and the livevol people have been very helpful. 

 

check out their demo video here:

 

http://www.livevol.com/movies/lvx-demo/lvx-demo-movie.html

[Marco]

one thing I came across in their small print was that they charge 0.65/lot and will pass on exchange fees (as IB) but reserve the right to keep exchange rebates. That might be just the same cluase as IB has (didn't check) -  Are they passing rebates on or are they pocketing them?

 

Also if for some reason you need/want to use TWS - you still can right?

[Mikael]

Hi Marco, haven't really looked into that but here is what it says on IB:

 

 

In cases where an exchange provides a rebate, we pass some or all of the savings directly back to you1

 

IB's Cost Plus commission models are not guaranteed to be a direct pass-through of exchange and third-party fees and rebates. Costs passed on to customers in IB’s Cost Plus commission schedule may be greater than the costs paid by IB to the relevant exchange, regulator, clearinghouse or third party. For example, IB may receive volume discounts that are not passed on to customers. Likewise, rebates passed on to customers by IB may be less than the rebates IB receives from the relevant market.

 

Some or All means anything from greater than 0% to 100% rebate IB got. It is at their discretion so technically they can pass on 0.000000000001% of the rebate back to you and this statement would still stand.

 

I think the main advantage for livevol is #1 their platform, #2 they are 5 cents cheaper than IB's 70c commission on option premiums >10c, so it should cover whatever rebate they decide to withhold most of the time.

 

however, i don't know if they will match IB's policy on  < 10c contracts for 50c. Probably will email them about that. 

 

you can keep your IB account open and just transfer whatever % of money you want directly form IB to your livevol IB account. then you can just use TWS and livevol at the same time.

[PaulCao]

Hi, 

 

Sometimes liquidity rebate takes a lot off your commission, e.g., 

 

http://cdn.batstrading.com/resources/regulation/rule_book/BZX_Fee_Schedule.pdf

 

"Customers who provide liquidity are offered $0.30/contract rebate on BATS option exchange" - so original IB commission of 0.70 should be rebated to 0.40/contract under this case. 

 

Also, can someone confirm if Livevol does actually execute with IB platform. I checked their fine print and they said that they clear with either IB or Apex.

 

http://www.livevolsecurities.com/stock-options-trading-pricing

http://en.wikipedia.org/wiki/Clearing_(finance)

http://www.onlinebrokerrev.com/other_articles/clearing-firms.php

 

Clearing is different from execution. For example, my former employer Lime Brokerage cleared through Apex and Goldman Sachs  which meant that the customer's account custodians was at these clearing firms (so our clients got access to the Goldman Sachs account management portal and margining) but the execution of the trades were routed not through clearing firms' trading platform but through Lime's trading servers co-located with the exchanges server-room in Jersey City and Kansas City.. (For anyone who's curious as to why people don't just get accounts directly through Goldman, the value-add was the co-location where most customers were algorithmic high frequency traders; customers upload their algo's onto the trading servers and respond in real time to quote streams and pipe out orders to exchange servers a few feet away in the exchange data centers). 

 

In other news, in the course of looking up Livevol, I realized that I just passed by their headquarter this afternoon sightseeing on vacation; they are located in the financial district in San Francisco, very close the TransAmerica Pyramid building. This just means nothing except that I check too much on this forum, 

 

Best,

PC

[Saud]

...trading servers co-located with the exchanges server-room in Jersey City and Kansas City.. (For anyone who's curious as to why people don't just get accounts directly through Goldman, the value-add was the co-location where most customers were algorithmic high frequency traders; customers upload their algo's onto the trading servers and respond in real time to quote streams and pipe out orders to exchange servers a few feet away in the exchange data centers). 

 

 

Hi Paul,

 

funny I was just reading about this:   http://finance.fortune.cnn.com/2013/08/30/latency-arbitrage-costs/

 

This guy did a study where he showed how he could easily do latency-arbitrage by getting the NBBO ahead of the public.

 

"Here's how Hendershott's latency-arbitrage strategy worked: Redline allowed him to use its "direct market access" -- cables that run directly from exchange servers to its own. Redline's server was co-located with that of BATS Exchange so that the "latency" on information and orders coming from BATS was cut down to barely one thousandth of a second. As a result, some of the quotes on public feeds such as the crucial "national best bid and offer" feed were a few milliseconds behind those Hendershott could see on his direct link with the exchanges. With a half-decent trading algorithm, Hendershott would have had ample time to buy Apple at a stale price with a guarantee that he could sell at a profit. Every couple of seconds. All day. Risk on the trades: zero."

[dbh21]

FWIW - Livevol might take the rebate - but in return they are offering a pretty awesome tool. I would say its better than TOS but not a complete replacement. The livevol development team has done an awesome job. And its waaay more intuitive than IB (which i find to be the least intuitive interface I've ever used).

[Mikael]

Yes I agree. ToS still has the best analysis tools but the IV historical data and the way it's presented on livevol is unmatched by ToS or TWS.

[Mikael]

Hello, got an email back from LiveVol regarding questions posted above:

 

Hi Michael,

 

Hope you had a nice weekend.

 

1)      For the account you are opening, the clearing will be done by Interactive Brokers.  We do allow APEX accounts but those can only be opened by USA citizens.  Additionally, APEX accounts are typically geared for extremely knowledgeable and experienced traders who plan to fund the account with a substantial amount.

2)      This is essentially the same answer as above.  For your account, the trades will be placed through Livevol X but the actual execution will be handled by Interactive Brokers.  For APEX accounts, it is Instinet.

3)      The rebates will be handled by Interactive Brokers so any amounts that you see on their site, you can expect those same amounts for your account.

4)      We don’t match IB’s rate on the options below a dime but if we see you’re doing a lot of volume after you open the account, we can certainly take a look at your overall rate and possibly give you a lower one.

Thanks and let me know if you have any more questions.

[Kim]

Based on numerous requests, I would like to describe a process of placing a trade on Interactive Brokers platform.

 

First, it is important to understand that getting good fills is critical in short term trading. Trading is a business. As in any business, prices are involved, and our profitability of success will always depend on our ability to get good fills. Every business revolves around this cost equation. If getting good prices was so easy, there wouldn't be any markets/any business...

 

There are several ways to do it. Here are the steps I'm using.

 

1. Add a new Quote Monitor.

 

2. Add a security you want to trade.

 

3. Open a combo trader for that security (right click on the row, then select Combination/Options Combos.

 

4. From the combo trader, select the appropriate strategy, then expiration and strikes.

 

 

5. Click OK or Add. You will see the appropriate combo with the individual legs.

 

6. Observe the combo mid based on the individual legs (it might be not the same as the mod of the combo).

 

7. Click on the ask to buy or the bid to sell. Change the order value - I usually start slightly below the mid to buy or above the mid to sell. Change the number of contracts.

 

 

8. Click on T (Transmit). A preview window will open. Make sure the order is correct for all legs, then click Transmit.

 

 

9. Once the order is transmitted, you can wait few minutes - if not filled, start increasing the bid gradually.

 

10. Once filled, the combo row will show the number of contracts. To close it, right click on it and select Trade/Close Position. 

 

Let me know if you have any questions.

[Kim]

I would like to describe the process of making an adjustment, using our current YUM trade as an example.

 

We started with the 70 straddle. As the stock moved higher, I made the following adjustment:

 

Sell to close YUM October 18 2013 70.0 call
Buy to open YUM October 18 2013 72.5 call
Price: $1.31 credit. 

 

Basically what we are doing here is selling the 70/72.5 vertical spread. So this is what we need to do:

 

1. Open a combo trader for YUM (right click on the row, then select Combination/Options Combos.

 

2. From the combo trader, select vertical strategy, then expiration and strikes.

 

 

3. Click OK or Add. You will see the appropriate combo with the individual legs.

 

4. Click on the ask to buy or the bid to sell. In this case, we want to sell the vertical since we are selling the 70 strike and buying the 72.5 strike. Since we are selling it, we will get a credit, and we want to click on the bid and increase the value to get as much credit as possible.

 

Rest of the steps are similar to the opening order.

 

After you are filled, the adjusted position will be a 70/72.5 strangle. You will need to re-create the position in order to close it as one single trade.

[JWalk]

Hi everyone,

 

My apologies if you guys have already had this conversation, but I am looking for a way to place a contingent order on a spread and I want to place it at the mid price (give or take 5/10 cents).  Is there a work around to be able to do this with IB?  I understand that you can place an order at the Mark in TOS, but IB does not have anything similar.  

[Kim]

I could not find out how to do it with IB. Maybe opening a ticket with IB (works better than a phone call) will help.

[JWalk]

Thanks.  I've tried with IB, but I just get the answer that an order at the mid price cannot be set up in advance for a spread.

 

I was hoping that someone in this group had found a creative way around things.

 

What do you do if you want to place an order in advance -  for when a specific price of the underlying is hit (for example closing a spread at a specific price of SPX)?

[Kim]

Limit order seems like the only way. You can use a software like ONE to estimate the approximate price of the spread when the underlying hits your price, but of course this will be only estimation. Then set the limit at aggressive or conservative price, depending how desperate you want to be out of the trade. Personally I never do that because I can watch the markets most of the time, but for some people this is the only way to set a stop loss. 

[JWalk]

Thanks again..

 

As a matter of fact I have been investigating a subscription for ONE versus OptionVue.  It seems like ONE is less expensive.  Do you use it with an IB data feed?  Any comments on either product?

[Kim]

I use it with TOS feed. IB should be similar. I find it excellent and well worth the money. OptionVue is considered an excellent product as well, but I'm not sure it justifies the price difference.

[cems1]

I am using ONE software with a live data feed through IB. Has anyone come across the following message and is there a way to prevent this other than paying an additional $30/month for the booster pack?

 

"You have requested data for 116 contracts simultaneously, which exceeds your account current limit of 100. You may increase your limit by subscribing to market data Booster Packs.

 

Continuous Watchlist Sort Note: Enabling "Continuous Sort" of a watchlist requires simultaneous market data for all contracts in the watchlist, including contracts that are not visible in the watchlist window."

 

(tried attaching a picture, but would not accept my .png file)

[Richard]

Kim,

 

With regard to the Interactive Brokers trading platform do you have any suggestions on how best to get familiar with it for a newbie? There are quite a few options including TWS, TWS Latest,TWS beta and then there are the web trader editions. I have setup a paper trading account. Perhaps IB can also offer some help in this area. I know they have some tutorials.

 

Thanks,

Rich.

[Kim]

I'm using TWS, not web trader. It offers more options. The platform does have some learning curve, but once you get used to it, it's actually pretty good. The IB tutotials are not bad, it's a good place to start. 

[PaulCao]

Hi, 

 

Another thing I'll add is a major advantage of using IB TWS over WebTrader is that sometimes when you enter a multileg trade with 2 or 4 legs, it is easy to mess up your legs especially with WebTrader clunky interface resetting the expiration dates what-not; nothing is worse then entering into a trade that you didn't intend, having it fill and trying to get out of it with more commission and unfavorable spread (I'm sure some of you have had similar experiences as me...)

 

On TWS, when you're closing a position, it'll tell you if you own the position or not on the order, so it's a good way to check for errors. 

 

Best,

PC

[praveen]

Hi Kim,

 

I was told by the IB team that the ComboTrader has been deprecated out of TWS as of version 947 released on Oct 23, 2014.  It has now been replaced with StrategyBuilder.  It is also mentioned in their release notes.

 

I have to watch a few of their webinars that they asked me to watch to see if I can figure out how to enter your trades into my Paper Trading account.  But it would be nice if you are able to help update this topic with new instructions using their latest version of software so it will help speed up the process for myself and others who are new to options trading. Thanks,

 

Praveen

[Kim]

Type the symbol, click enter and then combinations, then "option combos Smart"

 

[Kim]

I'm often asked how to get good fills with IB.

 

So first, it is important to understand that getting good fills is critical in short term trading. Trading is a business. As in any business, prices are involved, and our profitability of success will always depend on our ability to get good fills. Every business revolves around this cost equation.If getting good prices was so easy, there wouldn't be any markets/any business...

 

Before placing a trade, always observe the prices for a while. Here is an example how prices are presented in IB:

 

 

This is an example of a calendar spread where the mid of the long leg is 11.25 and the short leg 10.25. So the real mid of the spread is 1.00. However, since the bid/ask of the spread is 0.90/1.40, IB presents the mid of the spread as 1.15. This is not correct. Please always calculate the real mid based of the mid of the individual legs.

 

After you observe the mid for a while, place an order slighly below the mid (for buy orders) or slightly above the mid (for sell orders).

When you place GTC order, sometimes It doesn't get filled. While if you change it into a limit order (during active market hours), sometimes it gets filled even though the price is same as in GTC. Sometimes just "pausing" the order and resubmitting it would get filled. "Playing" with the order by changing it by 1-2 cents sometimes helps.

Changing the order from SMART to specific exchange, for the same price, can work as well.

[TDM]

Hi Kim,

 

You write to buy slightly below the mid and sell slightly above the mid. This would be better than mid pricing (i.e., if a spread is trading at a 1.00 mid, we would try to buy it for .98 and sell it for 1.02). Is this correct? I know I struggle to get mid pricing often and would think it makes sense to buy slightly above and sell slightly below, accepting a few cents of slippage.

 

Also, are there any exchanges that you've had luck with?

 

Thanks,
T

[Kim]

Getting filled better than a mid doesn't happen too often but sometimes it does. I'm not saying you will get a fill each time, but this is where you should start. Also prices tend to fluctuate and the mid might come down.

If you don't try you don't know, and sometimes you might be surprised by the fills you get.

[Richard]

i just tried Kims suggestions on the TLT trade and it worked! I had a GTC order to sell at 0.54 for several hours which would not get filled. As soon as I "played with it" a bit it got filled at 0.54! I tried a combination of things like pausing execution, changing from GTC to Day and finally cancelling and resubmitting the order.