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Getting good fills on RUT combos?

Discussion in 'Options' started by Capt Hobbes, Jul 14, 2015.

  1. Capt Hobbes

    Capt Hobbes Well-Known Member

    Hi all,

    I wonder if someone could give comments / advice about my recent experiences. I've traded through one cycle of M3 and have a BB open. Normally I had no problems getting fills at the mid or a nickel away. However, today I had a very hard time exiting a broken wing condor. I saw a thread some time ago talking about getting fills on RUT butterflies, with some good pointers, but not enough.

    How often does it really help to break a funny/complex order apart into verticals, like that post suggested? That wasn't my experience today. I was trying to do a -1210 +1260 +1270 -1290 order. I couldn't get a fill up to .40 worse than the mid (mid floating in the 10.70-11.00 range). I assumed the high vertical was the stickler, with only about 80 volume at the 1290 strike. I tried just +1270 -1290, and couldn't get it up to the same .40 away from the mid (mid being 13-ish). Given this, what would be a reasonable thing to do? I really wanted out, so ended up just closing .65 worse than the mid, so the whole trade ended up a wash instead of a small profit.

    Also, what's a good way to handle the order, mechanics-wise? I usually start .5 - .20 from the mid on the better side and walk to the mid. If the mid doesn't work, I try to continue no further than another 1% or so of the price. Is this a reasonable approach? How long is a good time to wait for a fill before walking closer? RUT options are trading electronically, but is the market maker usually a human or a program?

  2. Kevin Lee

    Kevin Lee Well-Known Member

    My two cents :

    Mid price doesn't always mean it's the right price. Prices below or above mid do not necessarily mean worse or better price either. The mid price fluctuates quite a bit as the bid/ask prices move. Therefore, we shouldn't just rely on mid price as a gauge of whether we are getting a good price. We need to observe and compare the prices.

    To compare price, if it's a balanced butterfly, you can just compare the Call, Put and Iron butterfly. Plus you ought to know what prices have been filled before around similar conditions as a reference. If it's unbalanced butterflies or condors, then you can compare the Time premium of Call, Put, Iron equivalent using the spread tool in OV.

    If after all the comparisons, you're still getting bad fills, then it's probably a genuine issue but those are not that frequent in my experience with RUT and usually I just wait a while and the issue will go away.

    Hope this helps.
    Venkat and RayM like this.
  3. uwe

    uwe Well-Known Member

  4. hwm

    hwm Member

    It is also my experience that RUT is much more difficult to fill than a year or two ago. A lot of time, the most frustrating thing is unable to get a fill. Usually before the trade, I try to find out what is the mid price is fluctuating to get a sense of the mid price. I also compare the call butterfly price to the put butterfly price. Once I have a good idea of the mid price, than I will give 5 to 10 cents and wait. Sometimes if I really want to put in he trade, I will give 15 or 20 cents. Most of my fill is about 10 cents or more off the mid on the bad side. I now move half of my trade to SPX because I found SPX is actually easier to fill than RUT.
  5. ACS

    ACS Well-Known Member

  6. Venkat

    Venkat Guest

    All these are excellent points. When market is rallying, orders that provide positive deltas will be filled faster and vice versa. Similarly after a rapid move up, orders that provide negative deltas will be filled quicker as a means of hedging. It depends on the market conditions as well.
  7. Capt Hobbes

    Capt Hobbes Well-Known Member

    Thanks everyone, great info! I found that using the OV spread tool is a subtle form of torture, but it was easy enough to do the same in Excel with TOS data. hwm, are you trading the regular pit-traded SPX monthlies, or weeklies, or SPXpm?
  8. hwm

    hwm Member

    I trade monthly regular SPX (not SPXpm) about 30 to 60 DTE, sometimes even out to 70 DTE, and I mostly trade quarter strikes. I found a lot of time I can get pretty good fills. The problem with SPX is that when Vol spikes really really high, SPX butterfly will suffer more than RUT.
  9. dacamon

    dacamon Member

    Kevin, why do you say that when using unbalanced butterflies you have to compare the time premium and not the mid price as with balanced butterflies? Could you explain it further?
    Thanks a lot!

    Sent from my iPad using Tapatalk
  10. Kevin Lee

    Kevin Lee Well-Known Member

    When you have a balanced butterfly, let's say with 50 pt wings on each side, if the call fly cost $10, theoretically the put fly should be $10 too. The iron fly should give you $50 - $10 = $40 credit. This relationship falls apart if it unbalanced. So to see which version has a better price, either you track the calculation on excel or use the spread function in OV to compare the time premium.

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