Getting Fills

[cwelsh 1,499]

Several people have asked questions on why they aren't getting fills on option prices -- particularly when they have a price at the ask, or even .01 or .02 over it.

Take the following example:

I was trying to get a fill on the FDX straddle at $5.78. I had a $5.78 limit order in. At one point the bid ask became 5.70/5.76, but I still did NOT get filled.

How does this happen? My immediate reaction is like most people's, TOS must be screwing up, or I'm just getting screwed. While that MIGHT be the case, in this instance it was not.

Everyone should know that there are MULTIPLE option exchanges. If you're doing a multi-leg order (straddle, strangle, IC, whatever), you have to match on one exchange. TOS delineates these different exchanges with different letters (A, B C, I, N, X, Z, etc.).

However, when calculating bid/ask spreads, it takes the prices and combines them from all exchanges.

So for instance, on stock XYZ, you might see the following

Exchange Put Bid Put Ask Call Bid Call Ask Straddle Bid/Ask

A $1.00 $1.10 $1.00 $1.10 $2.00/$2.20

B $1.01 $1.11 $0.99 $1.09 $2.00/$2.20

C $0.99 $1.09 $1.01 $1.11 $2.00/$2.20

HOWEVER, TOS would display the following Bid/Ask: $1.98/$2.18, as it selects from different exchanges.

The software would then TRY to match the calls/puts across different exchanges, but you have no guarantees this will happen. So even though you have a limit order of $2.18 or $2.19, you might not get filled. Now typically prices will bounce around .01 or .02 and you'll get your fill, or maybe there's a perfect cross-exchange match. And in high volume options this happens all of the time. However in lower volumes, it frequently can sit for a while -- even at your brokers calculated Ask. You're only guaranteed a fill if you match the exchange.

[Xfanman 9]

What a great explanation of what apparently happened to me today on the ADBE trade. I couldn't get filled even though my limit order hit the ASK price and it confused the hell out of me. I've never had this issue on OH with Non-Spread transactions.

Thanks for taking the time to write this up.....Scott

[cwelsh 1,499]

Not a problem, it was happening to me on ADBE too. Given the volume that was trading, that is a little surprising, so I went and looked at the details -- the different exchanges were actually off by almost .05 per instrument, which evidently made matching pretty hard. Normally there's a lot more normalization, otherwise the HFT and arbitrage people jump all over it.

[Marco 221]

I'd call that a rubbish 'smart' order routing. Why cant they lift call and Put on different exchanges? I'm 99% sure that's not the case with IB I've done quite a few option trades with them now and never seen that sort of thing.

[Kim 7,499]

I haven't seen that either. I'm usually able to be filled very close to the mid. For ADBE, I think it was actually below the mid.

I just checked few fills. Most of them have been filled at the same exchange for both legs, but I found few with fills from different exchanges:

http://steadyoptions.com/forum/topic/69-trades-ibm-june-2012-calendar-spread/

http://steadyoptions.com/forum/topic/135-trades-sina-may-2012-strangle/

[LSS 1]

I believe this is exact the difference between IB and Optionshouse or TOS. IB actually gives you the best price they can find on different exchanges, while OH/TOS cannot. I suspect that OH only fill spread orders when all legs can be filled on the same exchange, which delays fills significantly.

[jay 1]

Let's talk exits. As a newbie here, I'm just wondering if you often sell the put and the call separately or do you put in a price to exit the position all at once. Must be more difficult to exit as a pair, I would think

[Kim 7,499]

Let's talk exits. As a newbie here, I'm just wondering if you often sell the put and the call separately or do you put in a price to exit the position all at once. Must be more difficult to exit as a pair, I would think

In 90% of the cases, I exit both at the same time. If you exit just one, you are taking a directional risk. In most cases it is just not worth it.

The only exception is if you get a really big move and one side becomes almost worthless. In this case I might keep it for earnings as a lottery ticket.

[Kelly Park 10]

I have had some trouble getting fills lately, even at the Ask. While digging into Fidelity's Directed Trading system, I noticed a statement that All or Nothing orders may be given a lower priority. I had started doing AON orders because other SO members have commented on partial fils they were getting, but maybe it is preventing me from getting fills at all. Has anyone else run into this?

[LloydC247 10]

I have had some trouble getting fills lately, even at the Ask. While digging into Fidelity's Directed Trading system, I noticed a statement that All or Nothing orders may be given a lower priority. I had started doing AON orders because other SO members have commented on partial fils they were getting, but maybe it is preventing me from getting fills at all. Has anyone else run into this?

I stopped doing AON orders because I was not getting fills. Since then I have not had problem getting orders completed filled, though it is often thorough multiple trades. No extra cost in commissions. I use eTrade.

[ammarmalhas 5]

Guys, I need help placing a limit order (stop limit) on the SPY Jul 21 strike $136 straddle. i want to place a stop limit at $3 and sell at market if the price goes down to the $3 stop. How do I do that in TOS? Seems triggers work on one leg only! (I hope I am posting at the right forum)

Thanks

[RobertB 5]

Great post. Thanks.

As others have pointed out, IB's Smart algorithm has as one of its main features the ability to efficiently fill spread legs across multiple exchanges. So IB customers need not be overly concerned about this issue. The across-exchange "expanded" bid/ask price displayed is actually quite fillable on IB.

By the way, there was a minor typo in the sentence following your chart:

--------------------------------------------------------------------------------------------------------------

Exchange Put Bid Put Ask Call Bid Call Ask Straddle Bid/Ask

A $1.00 $1.10 $1.00 $1.10 $2.00/$2.20

B $1.01 $1.11 $0.99 $1.09 $2.00/$2.20

C $0.99 $1.09 $1.01 $1.11 $2.00/$2.20

HOWEVER, TOS would display the following Bid/Ask: $1.98/$2.18, as it selects from different exchanges.

--------------------------------------------------------------------------------------------------------------

TOS would display $1.98/ $2.22 (not $1.98 / $2.18 ).

[BillP 0]

Been having a hard time getting filled at SO price on the ones that go on and profit. Am I by myself here?

[Xfanman 9]

I'm hit and miss Bill. It's been a lot better since I moved an account to IB. If I'm not quick enough though and the price is moving I end up missing trades too. I'll just set a limit order around Kim's price and hope it comes back down. I think part of the reason we miss some at Kim's fill price is he sets up a favorable limit order ahead of time and if the price dips for a minute or two he gets a fill and reports it and it's already moved back up for the rest of us that aren't pre-loaded with the same limit orders. Of course we can sometimes get in later at a better price than he did so I'm not complaining

[tjlocke99 18]

I have not logged this, but I believe we do miss most profitable trades this way. If you get in at a lower price does anyone have data that those trades have on average been profitable?

I'm thinking the solution could be limit orders set before the open, noting that you could overpay this way (one way this can happen because the bid/ask could actually open lower and you'll overpay). Also you could end up delta positive or negative.

[Kim 7,499]

I think the best thing to do is to follow the discussion topic where I usually indicate what price I'm looking at. With NTAP for example I indicated that I consider 3.00 or under a good entry point. I had an order at 2.95 and then the ask dropped to 2.92 for few minutes and I was filled at lower price than my order.

tjlocke, look at all three GOOG trades - many members got it cheaper than me, all of them ended up nice winners. Also, even if you pay slightly more than me, you can set your own price targets - some members sold SODA,DIS and APA at much better prices than me. I think in the long run, it will level out.

[tjlocke99 18]

Kim,

I am in no way criticizing you. I read Jeff Augen talk about how he thought he would trade and have a full time job! He basically said he found that was impossible and the rest is history! I think I am learning that myself.

The bottom line is unless you are at a terminal alot, making these earnings trades may not be easy or work. HOWEVER there are probably 100 variations of ways to make them work, you just may end up overpaying at times. However you can overpay and still make money

[Kim 7,499]

However you can overpay and still make money

Exactly.. As long as you don't overpay too much.

Again, we discussed it a lot already. I suggested some solutions, but obviously there is no magic solution here.

[Xfanman 9]

What I'm learning is that I need to setup trades ahead of time with a good limit order after Kim expresses his intention of getting into a trade. My hesitation up to this point has been some of the later trade discussions will sometimes bring up legitimate reasons NOT to take that particular trade. I'm probably erring on the side of caution however and most of the time this is noted early in a thread. Like many of you, I'm not always at my desk ready to enter an order when I happen to get Kim's alert and often times it's too late when I can get to it (or as evidenced by my rushed CSCO trade which through dumb luck ended well for me).

[ammarmalhas 5]

what i usually do is place limit orders as soon as Kim announces intention on trading something. I only do so for the plays he thinks are "not too expensive" or cheap". It has worked so far and if ever a play is cancelled by Kim or others who see it not so great, then sell, take a minor loss and move ahead. I also cannot attend to mu computer more than an hour a day and at different intervals. Good luck.

[kowski06 4]

I think the best thing to do is to follow the discussion topic where I usually indicate what price I'm looking at. With NTAP for example I indicated that I consider 3.00 or under a good entry point. I had an order at 2.95 and then the ask dropped to 2.92 for few minutes and I was filled at lower price than my order.

tjlocke, look at all three GOOG trades - many members got it cheaper than me, all of them ended up nice winners. Also, even if you pay slightly more than me, you can set your own price targets - some members sold SODA,DIS and APA at much better prices than me. I think in the long run, it will level out.

Hi Kim,

First, just wanted to say that I really like this forum and think it is well worth while. I have been learning a lot, and have been reading suggested books and articles as much as I can. Just as back ground, I had no experience with options prior to joining SO, so I really have started at the bottom of the learning curve, but have learned things every day. So my comment in regards to the getting fills etc is coming from the fact that I know I still have a lot to learn which makes me more hesitant on picking an entry price unless I am 100% sure of what price you're looking at.

I switched to IB like a lot of others have recently, and I have been able to get better fills, but I think where I still have questions is sometimes it's not as clear what you consider a good price, at least for those of us (like me) who are at the lower end of the learning curve. NTAP I missed today because I was not 100% sure of the price you were looking for since you were still backtesting.

At least for me, when you indicated "The August 33 straddle trading around 3.00 implying 9.0% move, with IV around 72%. Seems not expensive. I will do some more backtesting and might be looking to enter today or tomorrow," this wasn't definitive enough for me to place a limit order yet, since you were doing more backtesting, and also because the phrase "seems not expensive" doesn't always mean you go for that current price, sometimes it changes after the backtesting. And sometimes in the initial discussion you indicate "seems expensive" but then after backtesting you go with that price. (I don't mean this to sound like I'm complaining or criticizing what you have been doing, just that due to still learning, I am sometimes left w/ some doubt as to what price you may go for in the end)

What is more helpful for me to feel comfortable putting in a limit order prior to your alert is something like CREE where you said "Okay, did some backtesting. If I can get the weekly straddle at or under 2.40 which implies 10% move, it should be a good deal." or ESRX where you said, "Seems not expensive. Backtesting shows decent results. Ideally, I would prefer to get it below 2.80." These two I did place limit orders prior to your alert because I felt there was a little more guidance for them.

Maybe it would be helpful for those of us still learning and/or working if there was always a quick follow up post after the backtesting is complete indicating if the initial good price still stands, or if you have a new price in mind based on the backtesting.

Thanks!

[Kim 7,499]

Point well taken, thanks for your comments. I think over time, you will probably learn to make your own decisions, but I will definitely try to be more definitive prior to placing an order.