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The Perfect System? - at Least in Theory
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The Perfect System? - at Least in Theory

  #1 (permalink)
Trading Apprentice
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The Perfect System? - at Least in Theory

So I'm paper trading my system with Thinkorswim for a few months, selling iron condors for the suggested limit ptice, then buying them back a few days later for a lower price.
I was coping with the occasional, outrageously irrational, apparent profit, particularly on AMZN, eg a $500K gain on a 10 contract position in a few days. I figured it was some glitch in their data feed. But most of the trades ( 98% of them) looked reasonably healthy, and the system still showed a profit after discounting those wild bonuses. I believed it was time to test the system on another platform.
I would have been happy to go live with TOS, (because of their amazingly well-organized trading platform and despite their horrendous commissions), but they won't let me open an account because I live in Australia.
After much mucking around I managed to get accounts open at OptionsXpress and Interactive Brokers.
However, when I try to Sell to Open my condors at the limit prices suggested by TOS, the orders don't get filled. They sit there for days and nothing happens. What gives? Anyone know why?
:wtf:
As for IB, they have the world's most unintelligible, complicated and confusing paper trading platform. They may be cheap, but streuth, you have to work hard to understand what's happening!

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  #2 (permalink)
Elite Member
Toronto, Ontario, Canada
 
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This may sound dumb but do you have "Margin" setup/active in your account? Some accounts I've tried before have had the same issue and it's been because I hadn't applied for Margin which is often (if not always?) required for selling short.

Each broker's different as is each instrument. With Forex and Futures the margin is naturally built into the account in many cases since they are leveraged instruments most of the time.

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  #3 (permalink)
Market Wizard
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Andrew Scott View Post
So I'm paper trading my system with Thinkorswim for a few months, selling iron condors for the suggested limit ptice, then buying them back a few days later for a lower price.
I was coping with the occasional, outrageously irrational, apparent profit, particularly on AMZN, eg a $500K gain on a 10 contract position in a few days. I figured it was some glitch in their data feed. But most of the trades ( 98% of them) looked reasonably healthy, and the system still showed a profit after discounting those wild bonuses. I believed it was time to test the system on another platform.
I would have been happy to go live with TOS, (because of their amazingly well-organized trading platform and despite their horrendous commissions), but they won't let me open an account because I live in Australia.
After much mucking around I managed to get accounts open at OptionsXpress and Interactive Brokers.
However, when I try to Sell to Open my condors at the limit prices suggested by TOS, the orders don't get filled. They sit there for days and nothing happens. What gives? Anyone know why?
:wtf:
As for IB, they have the world's most unintelligible, complicated and confusing paper trading platform. They may be cheap, but streuth, you have to work hard to understand what's happening!

I'm guessing it is the false allure of limit orders, and people fall victim to it in stocks, futures, options - just about everything...

Limit orders are only guaranteed to be filled IF the instrument trades THROUGH your limit price. If it only trades at the limit price, you may or may not get filled, depending on your place in the queue, and also the exchange's fill algorithm (even if you are first in line, it doesn't mean your order will be filled completely first).

Take a look at the orders you placed, and the subsequent volume that actually traded at the limit price. That should yield some clues.

That is the big problem with limit orders. Sure, you will always get your price if you are filled, but many good trades will never get filled. In fact, if you use only entry limit orders, ALL your losing trades get filled, but many winning trades might never get filled.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #4 (permalink)
1.Fibs 2.??? 3.Profit
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Andrew Scott View Post
After much mucking around I managed to get accounts open at OptionsXpress and Interactive Brokers.
However, when I try to Sell to Open my condors at the limit prices suggested by TOS, the orders don't get filled. They sit there for days and nothing happens. What gives? Anyone know why?

Are you paper trading or live trading in OX and IB? Are you trying to sell at the mid?

Paper Money is meant to be used to learn how to use the software, how to place orders, etc. Paper Money is not designed to be realistic in how orders get filled in live trading, it's not even close. In paper money all orders get filled. You could trade an option that has 0 volume... and it gets filled in paper money. It is very easy to find ways to take advantage of this to make paper money millions. In live trading none of this is remotely possible; ALL the orders do not get filled at the mid for whatever price the program is showing. In tos iliquid options and far out of the money options display some huge bid ask spreads that can be taken advantage of in paper money.

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The Perfect System? -  at Least in Theory-aapl.png   The Perfect System? -  at Least in Theory-goog.png  
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  #5 (permalink)
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rmejia View Post
Are you paper trading or live trading in OX and IB? Are you trying to sell at the mid?

In OX, I'm paper trading, and in OB I'm still trying to understand why they made their platform it so complicated and difficult to navigate.
Re the mid price, I'm entering sell to open ATM condors, at the mid price, so the market should be very liquid. For the exits, I enter buy to close orders at a much lower price.
Works fine in paper money in TOS - so well I am suspicious. Your comment has confirmed what I suspected. Thanks for the advice.

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  #6 (permalink)
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Psipherious View Post
This may sound dumb but do you have "Margin" setup/active in your account? .

I think so. It's only virtual trading in OX, but I seem to have plenty of "option buying power." And several other Sell to Open orders have been filled.

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  #7 (permalink)
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rmejia View Post
Are you paper trading or live trading in OX and IB? Are you trying to sell at the mid?

In OX I'm trying to sell at the mid. Is this a realistic expectation?

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  #8 (permalink)
1.Fibs 2.??? 3.Profit
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In tos option prices are not accurate when the market is closed so will have to wait till it opens and starts running. In the Trade tab, All Products when you create an order it shows you what I took a screenshot of and put arrows, the Natural to Mid prices, and on the left it shows you the Expected Price the underlying has to move so the order gets filled at the selected price. The mid price will never get filled instantly, it is at or above value, price need to move so the mid price gets filled, so you can wait or lower the option price if you want to get filled instantly. If you move the Nat to Mid slider you can see the Expected Price change till it goes red.

Iron Condors are tricky to price and are harder to fill because you are dealing with 4 options at the same time, all of them have to get filled. With single option orders I usually go for the mid and wait till it gets filled, if it does not then I let it go. With spreads since they are harder to fill I usually start going a bit lower than the mid little by little and waiting a bit till it gets filled. I prefer it to not get filled instantly, that usually means to me I got in at a bad price, I rather wait a bit, but also don't want it to not get filled so lower it little by little. In TOS once the order is placed, on the monitor tab, working orders, you can see your order price and the current price that is trading. So if you have an Iron Condor working for $2.10 and the current price is at $2.10 it won't get filled (in live trading) till price moves and the option price goes above $2.10. There you can edit your order and lower your price (if you're selling to open) to $2.05 and see if it gets filled. A single order would get filled, but the Iron Condor might not (since it is 4 orders) unless you lower the price even more, maybe to $2.00. It varies by underlying. It depends on the volume and how much the underlying has to move for the option price to move. If it's liquid and price is moving it will get filled easier.

I've never used OX but I imagine it should have the working order trade price and the current trade price as well, so there you can see that and use it to edit the order and lower the working price so it is below the current if you want it to get filled instantly.


Last edited by rmejia; July 28th, 2014 at 08:46 AM.
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  #9 (permalink)
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Just to compare, I entered a STO at MKT order for a DIA ATM iron condor in both OX virtual and TOS paper.
The TOS paper "filled" the order at $0.43, but the OX virtual only got $0.16.
:wtf

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  #10 (permalink)
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Re


I had the same issue as the poster had.

I thought I discovered the best system I had ever seen but then tried to run it live and could not ever get filled.
I tried it with condors like you and calendars as well.

I liked playing earnings plays with low probability of being hit , then again
Theta doesn't seem to move until after earnings anyway

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