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The art of execution (getting filled on SPX / RUT)

Discussion in 'Options' started by Rahul Sarin, Sep 13, 2015.

  1. Rahul Sarin

    Rahul Sarin Guest

    Hello friends,
    I have been having a very hard time getting filled on SPX at the mid-price. I haven't traded the RUT for sometime, but the last time I did trade RUT... I was having troubles getting filled on that too.

    This is how I execute my trade (please correct or advise me):
    Step 1: Put on a Fly / Vertical Spread on SPX about 5 - 10 cents above mid. Sit for 5 minutes to be filled.
    Step 2: I rarely ever get filled on Step 1. So I lower the SPX to mid-price and wait another 3 minutes to be filled.
    Step 3: About 30% of time I get filled at Step 2. Otherwise I lower my price to 5 cents below mid and wait for another 2 minutes.
    Step 4: About 40% of time I get filled at Step 3. Otherwise I lower my price to 10 cents below mid and wait another 2 minutes.
    Step 5: About 50% of time I get filled at Step 4. Other I lower my price to 15 cents below mid and wait another 2 minutes.
    Step 6: About 80% of time I get filled at Step 5. Else I lower to 20 cents below mid and get filled nearly 100% of time.

    What am I doing wrong?

    This is what I am thinking:
    If on average I am at least 10 cents off the mid on SPX, then might as well trade the SPY. However psychology wise its difficult to fork up those high commissions. I was thinking of changing brokers where I could lower my commissions to 20 - 50 cents / contract. Does anyone know of a good reputable broker that can offer me such fees.

    Hope you can help me out. I am happy to talk on the phone too if you prefer.
  2. The following is (or was) applicable to SPX Monthly options and not necessarily applicable to the other SPX products (SPXpm, Weeklies, etc.):

    The SPX monthly options are an "open-outcry" product and not totally electronically traded. The pricing for SPX monthly options you see on the screen is not "real". What I mean by that is if you have your broker call the SPX pit on the exchange floor and get a quote for a position you will get a quote that is very different than what you see on your screen. The first difference you will notice is that the bid/ask spread is much much narrower than show on the screen. The second difference the you (may) see is that the mid price does not match between the quote from the floor and the mid price on your broker screen.

    Example on bid/ask spread (from 04/23/2013):
    SPX May 1600-1620-1640 call butterfly
    TOS Thinkback shows EOD bid/ask spreads on the individual options of $2-$3.
    If you calculate the bid/ask spread for buying the bfly you get -$2.00 to +$8.70 ($3.35 mid).
    Notice the bid is a credit. That obviously would never happen.
    The actual quote I received (intraday) was 2.70/3.20.

    Current example:
    Similar bfly trade as above: SPX Oct15 1980-2000-2020 call bly
    EOD prices show: Bid/Mid/Ask or -2.80/1.45/5.70
    Again notice the bid is a credit (which would never happen)

    Note: Do not necessarily try to have your broker get a quote for you from the SPX pit. They will only do it for larger orders. (I don't know where the current limit is and it is also probably broker dependent.)
  3. Rahul Sarin

    Rahul Sarin Guest

    Hi John,
    Thanks for your reply. I use thinkorswim too. I usually trade 12 spreads in vertical at a time on each side. Do you know if that's a "large enough" order?
    Sometimes when I filled really fast on SPX (almost instantly), I figure that I probably got bad fill as the price instantly moves against me.

    Do you think trading SPY is better? Suppose I trade 12 IC...that is 12x2x2 = 48*10 = $480 in commissions (assuming $1 / contract), just to open the position.
    In this case do you think another broker will help with lower commissions?

    Thanks again!
  4. Challenger

    Challenger Member


    have you tried letting your order sit there for a longer period of time? If you are going to be in a trade that will last several days (or weeks), I don't think getting in within 6 or 8 minutes is important. Try to queue your order above the mid and let it sit a few hours. There is usually enough intra-day movement that will cause your trade to fill at your limit price.
  5. Rahul Sarin

    Rahul Sarin Guest

    I did try that.... some days the order doesn't fill at all.

    Also, in a fast moving market what do you do if you want to close a spread? Buy / sell each option separately?
  6. DavidF

    DavidF Well-Known Member

    Hi Rahul, no mention of strike selection in your description, are you trading the quarter strikes? My experience on SPX is that complexity of order and strike liquidity dictate execution ease. Whether the market is moving in favour or against the position is also an issue in my experience. A combination of a multi-leg spread on the less liquid strikes (anything that isn´t a 25, 50, 75 or 00) can be hard to enter and even harder to exit if it´s moving against you.
  7. Challenger

    Challenger Member

    Is anyone trading SPXPM? I was wondering if fills were any better since I believe it is all electronic. I am not sure this would be a solution for Rahul.
  8. Rahul Sarin

    Rahul Sarin Guest

    Hi David,
    I apologize...my strike selection is usually even strikes only about 30+ DTE... trading mainly on standard options. I have noticed the open interest and volumes on even strikes to be better than odd strikes.

    Also, I try to move positions in the direction of the market... by that I mean that I will move up / down my Put credit spreads if the market is coming down..... and do Call side adjustment if market is moving up. This strategy does help sometimes.

    Challenger - I did trade the SPXPM...its much worse. There is no liquidity, even though its all electronically traded.

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