Question: What influences the pecking order in which my “sell to close” order gets executed, and how do I get that order filled when I am on the ask? I often seem to be one of the last orders to get filled.
Unlike the stock market, the options market is not consolidated. There are six separate option exchanges. Depending on the type, size and price of your options order, your order is sent to one of the exchanges. When your order is received, it’s given priority based on time and price in that exchange, according to options trading articles.
The problem with six separate exchanges is that your trade could be in one exchange while trades are going off at another exchange at a price and size not available to you.
Additionally, some of the big option traders are able to have their orders “worked internally” before they’re displayed. These orders often receive price improvement and then are printed. Right now, for example, Schwab has been obtaining price improvement at the CBOE and Boston option exchanges.
Your options trading system may be providing you with a consolidated market view of the bid and ask volume and price. This would explain how orders arriving after yours at the same price could be executed ahead of yours. They’re being executed on different exchanges.
We’ve traded options through Schwab for years and have gotten good executions. You may want to open a test account at Schwab to explore if there are any differences between your current broker and Schwab.
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