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SPX Fills

Discussion in 'Options' started by gtnz, Jun 7, 2014.

  1. gtnz

    gtnz Guest

    First of all I'd like to thank Tom for e mailing me and alerting me to this website and forum.

    My question is regarding getting filled on SPX butterflies. I had a bearish OTM June Weekly 20 wide butterfly on.
    On Friday I decided to get out and take a loss as it was obviously not going to work out being so far away from the market, 1890. With the market roaring to the upside I found it very difficult to get filled even after lowering my price first 5 cents then 10 cents at a time. I had to do this many times to get filled and it's left me wondering if doing these OTM butterflies in SPX will work. I've done them with SPY and had no problems. The thing is as I was trying to get out, the mid price shown on the TOS platform was well above where I was trying to get filled and they still would not take the trade. This has left me wondering if the SPX is liquid enough to trade.
    If this was closer to the market would I be able to get fills close to the mid and get out in a hurry?

    Thanks and happy trading
    Garret Tangney
  2. tom

    tom Administrator Staff Member

    Hi Garret! Nice to see you here!!!!!
    I put an SPX broken wing butterfly on last week and got filled at or near the mid-prices. I put an eight lot on a few spreads at a time to kind of see where the fish were biting. I see in OptionVue that the volume and open interest is pretty good for the Jun 20th expiration. Here's the puts:

    Have you tried closing the trade with vertical spreads?
  3. gtnz

    gtnz Guest

    Hi Tom, I was really tired at the time I went to close the trade. The US markets are open from 1.30am to 8am NZ time. I didn't think it through properly at the time and should have waited until the market was closed and I wasn't so tired. I will try closing as verticals next time. If doing some size the brokerage adds up fast with SPY options so SPX could work out better. Have you done any OTM SPX butterflies either to anticipate a rising market or a falling market?

  4. tom

    tom Administrator Staff Member

    Hi Garret,

    I just started trading SPX last week so I don't have a lot of experience with it yet. I'll ask Jim Riggio to roll in on this one as I know he trades SPX a lot!

    I don't know how you can keep up with the markets with those trading hours. I can imagine you were tired!!!
  5. gtnz

    gtnz Guest

    Thanks Tom I appreciate any help working out how to trade the SPX. Yes the market open hours are always a problem for me when I come to New Zealand. When I'm in Chiangmai it's great. The US market open is 8.30pm and closes at 3am, this makes it much easier.
  6. SPX options are a unique animal. They are a CBOE product and only trade on the CBOE exchange. They are “traded on CBOE's hybrid trading model, which incorporates both electronic and open outcry trading”.

    Some important things to remember when trading the SPX on TOS(TD Ameritrade):
    • Trying to trade lot sizes 10 or more electronically is problematic. I think that maybe any size 10 or greater is forced into open outcry. There are two solutions to this problem. First, place orders with lot sizes of 9 or less. Second, (if your size is 10+) call the trade desk and have them call the order into the exchange floor.
    • The prices you see on the screen are not “real”. If you get a quote from the floor (i.e. a “real” quote) you will find that 1) the bid/ask spread is much less than what is shown on the screen, and 2) the mid price from the floor may differ from what you see on the screen. Sometimes the mid price is worse than what you see on the screen, but other times it is better.
    Bill C likes this.
  7. gtnz

    gtnz Guest

    Thanks John,
    I'd worked out the bid ask prices I see on the TOS platform were not real by the volume and open interest. How can the spread be so wide on something when it trades with good volume and has plenty of oi. Anyway I hear you about the sizes, less than 10 is always a good idea to fish out real pricing.
    Thanks for your input.
  8. jim

    jim Administrator Staff Member

    John summation was extremely accurate. The SPX has two different quote systems (one in the pits, and one electronic). The real quotes are in the pits, the electronically quotes (I.e., the ones that we see on our trading systems) are left extremely wanted on purpose. The SPX is perhaps the most liquid contract on the face of the planet. If the SPX pit fills 10 contracts at a price, they will usually fill 10,000. However sometimes the SPX electronic quote systems are skewed to one side or the other, and usually show better pricing then you can actually get when the market is moving. Don't be discouraged, it's just that the electronic systems update more slowly than the pit does. Once you realize that electronic quote system is slower than the real prices in the pits, you can adjust your bid and ask prices accordingly.

    If you were trading smaller size, and the commissions aren't that big of a deal to you, the SPY is a fine alternative.
    Bill C likes this.
  9. gtnz

    gtnz Guest

    Thanks Jim, I might employ a mix of both SPX and SPY. When I absolutely need a fill ASAP I'll do it on SPY to get a position on in a hurry and then use the SPX to add to positions. My bro is not so much a problem at the moment. When I start trading lots over 100 I'll have to get these SPX options fills mastered.

  10. jim

    jim Administrator Staff Member

    Garret, I think that is a good plan. I know a large money manager (with over $1 billion) who utilizes a similar SPX and SPY mixture.
  11. John,
    - How do you know this?
    - Is this due to an arrangement with the TOS broker in the SPX pit?
    - Nothing that I can find on the CBOE website specifies this.

    Related: over the last year, I've noticed that the CBOE seems to be changing direction/focus of SPX options vs. SPXPM. The language on their site seems to indicate that SPXPM is fully electronic where SPX is strictly open outcry.

    I would love to hear feedback from anyone who can verify what's actually happening (I have no dog in this game: I trade the RUT).

  12. I heard about it from someone else who (I think) heard it from Thinkorswim.
    I do have experience that seems to imply that this is the case. I once had an order for 10 or more contracts that had been working for a while with no fill. I changed the quantity to 9 and the order filled immediately. This was for a monthly SPX option. It may be different for SPX weekly, end of month, or quarterly options.
  13. Thanks, John.

    I've heard this as well, but am starting to wonder if it's strictly urban myth. The CBOE should be able (and willing) to verify if this is the case.
    But all of this adds up to anecdotal information, and nothing confirmed.
  14. I did some further research on this. Here's what I learned from the TOS Order Routing team:
    - 1. The default order routing for SPX spreads and singles up to 49 contracts is to go to the Electronic Exchange.
    - 2. Spread and Single orders for 50+ contracts are automatically routed to the Trading Floor.
    - 3. Exception to #1: any order that consists of both a Weekly leg and a Monthly leg (e.g., a diagonal or Calendar using both weeklys and monthlys) will *always* go to the Trading Floor, regardless of quantity. (This does not include orders consisting solely of Weekly *or* Monthly legs; it only applies when the order has both.)
    - 4. You can by-pass the floor routing for *any* order by using the order entry window to direct-route the order to the CBOE: in those cases, the orders will go to the electronic order book.
    garyw, Chaitanya, Rakesh and 3 others like this.

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