Am I being screwed?

[Brennen81]

Hello all,

After about 2 years of option trading now I have come to see a very common occurrence. I will often put in a limit option order for around the current price. Buys at bid and sells at ask, therefore not triggering immediately and less fees.

It seems that almost EVERY time I get a fill, the BID/ASK immediately end up well out of the opposite way. When I buy, price goes down. Sell, price goes up.

For example. I had a sell order in at 0.15 with the bid/ask at 0.14/0.15 for about 10 minutes today. This option consistently has no more than a 1 cent spread. Immediately, and I mean it, after my fill the bid/ask jumped to 16/17. This happens all the time.

Is it coincidence? Am I not fully informed? Are the prices being manipulated between the exchange and my screen to make a profit for IB?

Thanks for any input.

 

[EnlightenedJoe]

Your are not being screwed. This is natural behaviour of prices. Your 2 year experience should have told you that.

When you buy or sell, you are dealing with a business that is run to make a profit. You can't blame them for that. It is in their right to adjust the price how they want. Same way in a corner shop, the owner can change price as he wishes. It is then up to you to buy or not to buy.

It's possible the exchange price might differ from the price you are seeing. It all depends on whether you are dealing with an exchange traded asset directly. But if you are dealing with a derivative that options often are, then the middle man has some leeway in setting the price to how he sees fit. The middle man price generally track the exchange price but not always and not exactly. If the middle man spikes his price, it is in his right.

 

[kalott]

remind me of this (hope the link works)

" Every time he buys a small record reacts what he knows is a computer in the stock brokerage firm Timber Hill and offering more shares at a slightly higher price."

https://translate.google.se/transla...-tradingfirmans-aktierobot&edit-text=&act=url

 

[EnlightenedJoe]

remind me of this (hope the link works)

" Every time he buys a small record reacts what he knows is a computer in the stock brokerage firm Timber Hill and offering more shares at a slightly higher price."

https://translate.google.se/transla...-tradingfirmans-aktierobot&edit-text=&act=url

Very odd story. They look to me to be buying legitimately. Maybe in SE it's illegal to win. Perhaps they should try a different country.

Dealing with broker/bank strategies is the only real way of making money.

 

[tomorton]

Hello all,

After about 2 years of option trading now I have come to see a very common occurrence. I will often put in a limit option order for around the current price. Buys at bid and sells at ask, therefore not triggering immediately and less fees.

It seems that almost EVERY time I get a fill, the BID/ASK immediately end up well out of the opposite way. When I buy, price goes down. Sell, price goes up.

For example. I had a sell order in at 0.15 with the bid/ask at 0.14/0.15 for about 10 minutes today. This option consistently has no more than a 1 cent spread. Immediately, and I mean it, after my fill the bid/ask jumped to 16/17. This happens all the time.

Is it coincidence? Am I not fully informed? Are the prices being manipulated between the exchange and my screen to make a profit for IB?

Thanks for any input.

What are you suggesting?

Either -

1. the broker's prices follow the market - in which case the broker is just an echo of the market in which case your entries (and presumably stops) are obvious and wrong

or

2. the broker is adjusting prices to your disadvantage, specifically to trading against you,

In which case, either -

2a) they're quoting to you as an individual trader a unique price which they're not quoting to anyone else - which seems fantastical unless you're a super-heavy punter capable of busting them if they don't force you to fold

or

2b) they're quoting everybody the same prices but which are not following the market, in which case your entries are still wrong because if you had just identified the opportunity that arises when they do this you could get in on the other side. If you buy at 100 and the broker spikes the price down to 97 to stop you out, why aren't you in the group who bought at 97 and crucified the broker?

Scenario 1 seems the most likely.

 

[EnlightenedJoe]

If you buy at 100 and the broker spikes the price down to 97 to stop you out, why aren't you in the group who bought at 97 and crucified the broker?

Where on t2w does it say people should go against the trend ? The trend is down, so it's going to 94, then 91, then 88, etc.

 

[tomorton]

I'd like to hear Brennen81's response.

 

[EnlightenedJoe]

Brennen81: if the shop can spike the price down from 100 to 97, they can just as easily spike it down from 97 to 94, then from 94 to 91, then from 91 to 88, then from 88 to 85, ad infinitum. There's no law that says they can't. In fact this is one of the major reasons why people lose their shirts on the internet. They'd imagine there is a law that says the shop can't take the price to wherever they want. But they can and they do. They have the profits to prove it.