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Importance of good executions

Discussion in 'Options' started by Georges, May 19, 2016.

  1. Georges

    Georges Well-Known Member

    Yesterday in Round table from May 18 , 2016
    Dave Thomas told about importance of good ececutions and fills, when rolling and adjust positions.
    More important then having the lowest commissions.

    This seems to be a separate subject that can be to talked about.

    Does anybody know more about it?
     
  2. Boomer34

    Boomer34 Well-Known Member

    Being new...I am very interested in hearing anyone's advice and experience on getting better at rolling and adjusting positions...
     
  3. AKJ

    AKJ Well-Known Member

    Patience and analysis have been the two keys for my growth in the area of execution. Monitor what the prices are at different underlying and IV levels, then set a price target for yourself, and wait for execution.
     
  4. Tim

    Tim Well-Known Member

    Everybody worries about commissions, and we should. But in the scheme of things, commission is usually a much smaller factor than getting even pennies better on fills. For example, if you are buying a 5 lot spread for a total of 10 contracts:

    Commission at 1.50 per contract: $15.00
    Commission at 1.00 per contract with a $8.00 ticket charge: $18
    In the quote of the spread, for 5 lots, one penny makes a difference of .01 * 500 or $5.00. So if by negotiating you get a better price of say, even just 3 cents, which is entirely possible, your commission rate doesn't really matter.

    If you are trading bigger positions, or more lots, the effect is even greater ie, even one cent more than makes up your commie.

    For this example I made up some commie rates. If your rate is what I show here I believe you could find lower rates pretty easily.

    Now, how to negotiate price and execution is a whole 'nother thread. Generally don't be tooo quick to cave in from the mid price, be aware of what the market wants at that time (if it is going down a lot everyone wants to buy puts so if you are selling them, you can get fantastic prices), and develop the understanding of how much you have to "give" "them" to get your order filled. For example I know that on RUT you can very often get butterfly fills for .10 from mid. Patience helps too - let them think about your offer for a little while before changing your price.
     
    Georges, Capt Hobbes and Paul Demers like this.
  5. Gabor Maly

    Gabor Maly Well-Known Member

    When starting out I have been very anxious to get the adjustment done when XY trigger was hit and was even more nervous as price started to move farther away in the wrong direction against my position on the 5 min chart so most often I tended to get filled at the worst possible moment right before price reversed. While there is still a lot of room for improvement since I started to apply the concept of mean reversion and combine that with some technicals (volume profile of a daily timeframe...looking at POC, HVN, LVN for the day as it develops) my fills has improved. Sure waiting and being patient will sometimes backfire but more often it will not.
     
  6. Georges

    Georges Well-Known Member

    Thank you all for the answers.

    Andrew
    When trade SPX, why monitor other underlyings, to know a good limit price for your order in SPX.
    Does you also monitor SPY to compare, or also other underlyings?
     
  7. AKJ

    AKJ Well-Known Member

    Not different underlyings, I monitor prices of spreads at different price levels of the underlying......so if I have a specific spread I want to execute, I will look back over the past few days and try to understand how it trades at -20, -10, +10, +20 points from where the underlying is trading now.
     
  8. Georges

    Georges Well-Known Member

    Andrew
    Thank you. I understand now.
     

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