This is a rebroadcast of OICs webinar panel. In this deep dive discussion, Frank Fahey (representing...
Just What Are Those Trade Tags Anyway?
04/23/2015 8:00 am EST
Andrew Giovinazzi, of OptionPit.com, shares the definitions of many trade tags associated with options—along with his own take on each—in an effort to shed some light on some of the real reasons why options trade at prices that customers might not be able to get.
On kind of a ho hum day, I thought it would do to explain the array of trade tags that come courtesy of the option exchanges.
These definitions come from Livevol® www.livevol.com and I will add my spin on each below:
Regular: Indicates that the transaction was a regular sale and was made without stated conditions.
Translation: A vanilla trade buying or selling with nothing attached like another contract, stock, or settlement preference. I have seen trades go up wanting early settlement to fool the liquidity providers into missing a dividend. Tricky.
AutoExecution: Transaction was executed electronically. Prefix appears solely for information; process as a regular transaction. Transaction executed electronically. Solely for information. Only found in OPRA—options trades—and quite common.
Translation: Most orderflow comes through electronic execution nowadays and happens in the blink of an eye. In the old days, pre-2002, most paper went up manually. Essentially, a human does not touch it once the order is placed until a fill comes back. What might be interesting is AutoEx that sweeps several exchanges at once. That means someone is in a hurry and is grabbing all liquidity at a price.
Spread: Spread between two options in the same options class. Transaction represents a trade in two options in the same class (a buy and a sell in the same class). Prefix appears solely for information; process as a regular transaction.
Translation: Spread tags go up when one order is part of another order. Also, this means a spread price can touch another option order but not trip an execution. Essentially, a spread can touch (trade at the same price) a resting order and not trade it if the spread contract is on the same side of the market. This could be a reason that an order you placed did not get filled because the spread only touched your price yet did not generate a trade for you.
Straddle: Straddle between two options in the same options class. Transaction represents a trade in two options in the same class (a buy and a sell in a put and a call). Prefix appears solely for information; process as a regular transaction.
Translation: Similar to a spread in that it can touch a resting order and the resting order does not trade since the straddle has to go up as 1 trade. This is a way to get a call and put up at the same time.
BlockTrade: An executed trade of a large number of shares, typically 10,000 shares or more.
Translation: A block usually goes up as a matched order, meaning the buyers and sellers were prearranged in order to accommodate the larger size. Smaller orders can get frozen out of a block trade meaning, again, a trader might see a transaction at their price and not get filled.
NEXT PAGE: A Rundown of More Trade Tags|pagebreak|
IntermarketSweep: A trade resulting from an Intermarket Sweep Order Execution due to a better price found on another market.
Translation: This is new with electronic trading. The firm trade execution engine is trying to grab liquidity anywhere it can find it.
Combo: Transaction represents the buying of a call and the selling of a put for the same underlying stock or index. Prefix appears solely for information; process as a regular transaction.
Translation: Similar to spread and straddle but letting the world know this is some kind of risk reversal or collar. The combo can be on the same strike as well for a synthetic stock purchase or sale. Generally, this trade is a long call and short put or long put and short call.
Cancel: Transaction is the last reported for the particular option contract and is now cancelled.
Translation: For whatever reason, a trade that printed (consummated and place in the OPRA feed) is taken down and busted. This is probably due to broker or customer error.
SoldLast: Refers to a trade that is reported late and the Last Sale is reported as the price. The Last Sale price represents the last price paid for an option during the trading day. It is usually an administrative message.
Translation: This can happen with large manual orders where the trade is consummated in the pit, but for whatever reason, does not hit Time and Sales in a timely manner. This is also a reason for seeing a large volume trade and not getting a fill since the transaction is not trading there as a regular order.
Price Variation: is similar to SoldLast. Essentially, it occurs when an option trade goes up tied to stock at a different price, so the option prices are adjusted. The NBBO that's reported with the price variation is unreliable—as the exchange either prints it late—or it's tied to stock at a different price.
Translation: These trades are usually part of a package (options and stock) and the net debit or credit has to stay firm but the underlying price to create it moves around. The trade is consummated and could hit the tape (ORPA feed, Time and Sales) in a late manner.
Buy Write: An option trade tied to stock on some ratio. For the options to trade, a block of stock is crossed from customer to trader.
Translation: This is an option block trading with stock. Nowadays, stock and options on delta neutral ratios are common so an option trade might not be what it seems.
There you have it. A rundown of the trade tags and some of the real reasons why options trade at prices that customers might not be able to get. The gist is that option trades can go up but the intent is unclear since it might be matched with other options or stock. If you do not get a fill, there is generally a pretty good reason.
By Andrew Giovinazzi, Chief Options Strategist, OptionPit.com
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