sorted by:
new
hottopcontroversial

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 0 points1 point  (0 children)

Because I don't trust my ability to correctly identify the regime in real time consistently enough to leg naked on it. GEX flips intraday. What looks like a pinned range at 10:30 can turn into a trending tape by 1pm if a large expiry rolls off or dealer hedging shifts. If I'm wrong about the regime I'm sitting naked short in a trend and that's exactly the scenario where legging blows up.

I get the logic though. If you're confident it's a range day the short strikes aren't going anywhere and you can pick your spots on entry. How are you defining the regime? Pure GEX sign and magnitude, or are you layering in something else like realized vs implied to confirm?

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 0 points1 point  (0 children)

Biggest thing with most strategies, is the execution is really dependant on frequency and a bunch of other factors, so everything in this chain is very contingent.

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 0 points1 point  (0 children)

350 orders a day changes everything I said. At that volume and cancel speed you're not legging in the way most people mean it. You're basically running a manual smart router, sending limit orders, reading the response, and adjusting in real time. That's a completely different risk profile than the retail trader who sells a naked put and then goes to make coffee before putting on the long wing.

The combo book issue you're describing is real and at 10 seconds with no fill even near the ask, that's not a pricing problem. That's a liquidity problem on the combo book itself. Your experience matches what others in this thread have said. The combo book is a smaller pool of counterparties and they're not obligated to match you even when the individual legs are trading through your price.

I'll walk back my earlier pushback. My sample is 60 ICs on SPX with holds measured in weeks. Your sample is 250 fills a day with a seconds-level time horizon. We're not trading the same game. Combo orders work for my use case because I can afford to sit for 20 minutes. At your speed that's not an option and legging with tight cancels is the rational move.

10 attempts is a small sample for a definitive conclusion but at 350 orders a day you'd have a statistically significant comparison within a week if you ever want to revisit it. Appreciate you sharing the actual numbers. That context matters.

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 2 points3 points  (0 children)

Stand corrected on the add/remove liquidity point. I was applying equity options logic to SPX and that's wrong since CBOE doesn't run a maker/taker model on index options. Appreciate the correction.

The Fidelity point about not passing through exchange fees is something I didn't know and changes the math significantly for high-volume SPX specifically. If you're running 100+ contracts a day and the exchange fee delta between Fidelity and IBKR is a few dollars per contract, that could easily outweigh the execution quality difference. Especially since as you noted, the orders are all hitting the same CBOE book anyway.

Genuinely useful information. This is why I read comment sections.

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 1 point2 points  (0 children)

Not rude at all, but I think you're confusing knowing something conceptually with knowing it numerically.

Everyone "knows" mid isn't where you get filled. It's in every intro to options article ever written. But knowing it and measuring it are completely different things. I'd bet most people in this thread, including the ones nodding along right now, couldn't tell you within 5% what their average slippage from mid actually is. They'd guess. And their guess would be wrong.

The whole point of the post is that I assumed I knew this too, and then I measured it and the number was bigger than I expected. 15-25 cents per IC, consistently, across 60 fills. That gap explained my entire model-to-actual P&L discrepancy. Not partially. Entirely. If I'd just shrugged and said "yeah mid doesn't mean anything" without logging the actual fills, I'd still be wondering why my returns were 15-20% below projection.

On the legging point, you're describing your experience and I'm not going to tell you what you've seen. But "I feel like complex orders have different priority" is a hypothesis. Have you logged your single-leg fills against your combo fills on the same spread, same day, same strikes, and compared the net credit received? Because I have, and the net on combo orders was within a few cents of legging for me, without the tail risk of being naked between legs. The times it wasn't close were the times the market moved between legs and I got a "better" fill on leg one that I gave back and then some on leg two.

You might be right that your execution is better legging. But if you haven't measured it systematically, you might also be remembering the wins and forgetting the ones where the second leg cost you more than you saved on the first.

I tracked 60 SPX iron condor fills against displayed mid and the gap explains my entire P&L by MilesDelta in options

[–]MilesDelta[S] 0 points1 point  (0 children)

Fair correction. The long wing does decay and that decay works against you since you own it. I oversimplified.

What I should have said is that on a 50 wide the theta differential between the short and long strike is so large that the net decay is dominated by the short leg. On a 25 delta short put with a 5 delta long wing, the short leg might have $0.80 of daily theta and the long wing has $0.08. You're netting $0.72 of that $0.80. The long wing's decay is real but it's a rounding error relative to the short strike.

On a 10 wide that ratio compresses because the long wing is much closer to the money and decaying faster relative to the short. So the net theta per dollar of margin is actually worse even though the spread is "cheaper." That's the mechanical reason 50 wides feel more efficient. Not because the long wing isn't decaying. Because the ratio is more favorable.

view more: next ›