Many beginner traders wonder why they are having difficulty getting filled on their trades at order entry or exit. Today's Best Practices segment will cover the common issues, as well as the simple approach anyone can use to try and get good fill prices.
We demonstrate the importance of trading products that are highly liquid. When trading liquid products, the bid/ask spreads will be much tighter, leaving less room for error. There is also a higher probability that we get filled on our trades without giving too much edge.
Multi-leg trades like an Iron Condor are more difficult to fill than a simple spread or single option. Also, when implied volatility in the market or an individual equity rises, it will get increasingly difficult to get filled at the mid-price, since the underlyings will be moving around a lot more. A previous study we did demonstrated this.
When we route an order, we should start right at the mid-price of the trade and let the order work for a sufficient amount of time. On TOS and dough, spread orders default to the mid-price. Should we not be filled there, we can try moving our price by a penny towards the bid if we are selling, and to the offer if we are buying. Tom and Tony stressed the importance of patience.
Watch this segment of “Best Practices” with Tom Sosnoff and Tony Battista for the takeaways, on the importance of trading in liquid markets and understanding the order filling process.
This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.