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Difficulty with SPX Order Execution and fills?

Discussion in 'Options' started by Venkat, Jun 27, 2015.

  1. Venkat

    Venkat Guest

    Of late, I have been facing issues with SPX order execution and fills. I understand SPX monthlies trade on the pit and SPX weeklys trade on hybrid exchange (simple options with less than 50 contracts go to eBook, simple options with more than 50 contracts go to the pit, complex options of all sizes go to the pit...). Order execution is one of the primary reasons I moved from the monthlies to weeklys. Now I am seriously thinking of moving /ES options from SPX options. Any thoughts or suggestions?
     
  2. DavidF

    DavidF Well-Known Member

    Venkat, I´ve traded quite a lot of both SPX and ES in the last 3 yrs (mostly OTM SPX puts hedged with short ES futures, not ES options, although I also short a fair bit of ES OTM puts). As you prob know for ITM SPX puts the liquidity is an issue unless SPX has dropped off leaving what were ATM puts ITM. However ITM options on ES are almost always a problem with respect to open interest. I´m currently short 10 x 2150 SPX puts, OI is good (about 3600), but if it was much lower I´d try and set the trade up with calls (e.g, iron fly). I really like ES where there´s liquidity.

    Doesn´t help much for larger trades but I often trade single puts on SPX, they get cleared extremely quickly if it´s a busy strike (to maintain wide bid-ask?).

    I´m new to this site and notice almost everyone is trading the RUT, when I look at the risk-reward I´m not sure if it´s ideal given the absolute price changes in volatile periods versus the SPX. But I´ve never traded SPX in a crash so always worried that I´ll get fleeced on any severe volatility given the monopoly on the exchange. Wonder if ES would be better in that respect.
     
  3. Venkat

    Venkat Guest

    Thanks David. RUT is extremely efficient when comes to order execution for multi-legged strategies such as Butterflys. Since it trades on electronic exchange, the mid price is somewhat closer to actual price which is not the case with SPX. When I try to probe with actual price with option synthetics, you get very different prices for SPX put butterflys, call buttterflys and iron flys. You are right SPX is friendly for single strike options but very rarely people cross 50 contracts for single SPX options.
     
  4. DavidF

    DavidF Well-Known Member

    Venkat, do you know if the advantages of Yates options pricing (more accurate delta with complex positions) used in OV is diminished trading SPX due to the discrepancy between the floor price and the electronic quote? I realise delta is calculated based on multiple factors but not sure how much affect this has, and if so, would /ES thus be more accurate than SPX using OV for deltas?

    I´m on a trial version of OV at the moment but not sure if I should go for it if I´m trading SPX. As I understand it I´d also have to get QuoteVue as I´m neither at IB or TOS (other than paper trade for position analysis), so would be $200 per month.
     
  5. Venkat

    Venkat Guest

    I don't know the answer David :(

    I never used OV for simple SPX options. For complex options, OV greeks might differ from TOS greeks, but I don't think the pricing is affected.
     
  6. LuisG

    LuisG New Member

    Venkat, this is what I have observed in the SPX Weeklys execution and fills;
    The front expiration cycle is very active. In this case the JUL1 (granted, there is still a JUN5 active, but this has a selected/specific demand, mostly fund managers, so let's ignore this one) has plenty of OI in both CALL and PUT and, as function of where the SPX is quoting, those prices would be more active and "easier" to fill.
    The front expiration weekly start to show higher activity with about 21 - 14 DTE. For instances look at the OI of the AUG1 and AUG2 compared with JUL2 and JUL4.
    Although the AUG's may have some strikes with hundreds of OI, it does not compare with the several thousands that we will see on the week they expire.
    This lower activity accounts, in my experience, to "bad fills" and longer fill time. What that means to me is that the bid/ask spread will be wider and I may have to wait longer time to get a fill (and many times pay a higher price or receive a lower credit).
    Again, that will not be the case with 7 or less DTE.
    Also, during the last 7 days of the Weekly, the Fills are at a "better" price, which basically means that they get filled better than the Mid (as suggested by TOS).

    Coming back to your original question, I would be interested in knowing on what DTE are you experiencing the issues on execution and fills.
    Regards,
    Luis
     
    Venkat and RayM like this.
  7. Venkat

    Venkat Guest

    My fill problems are for options with 4-5 weeks to expiration....
     
  8. Slash51

    Slash51 New Member

    Venkat,
    I trade SPX weeklies a lot. I find the calculated "mid-price" of 4-legged trades is often skewed because one or more of the legs has an aggressive Bid or Ask price. I monitor the Bid and Ask volumes of each leg and only when they are roughly balanced do I consider the mid-price to be reflective of the expected trade price.
     
  9. Venkat

    Venkat Guest

    Thanks... it's a good point.
     

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