Herm,
I ran into an odd situation today while trying to ride the Edify viper. I'll spare you the details of why I wanted to do the following transaction. Suffice to say that the last visit to the high 9's tested even my relatively modest use of margin, and a while ago I wrote November 12.5 s on half my position, because I wanted to keep the stock. Today I wanted to roll down and out to the February 10s to generate some more cash (gotta pay bills).
A while ago, I posted my intention to do this by a net credit spread so that I did not expose myself to fast moves while executing separate orders. In keeping with that idea, I entered an order for a 1 3/4 net credit. This was 1/8 more than the spread quoted, but I thought I might get 1/16 on either side of the transaction. Not surprisingly, that didn't happen. Since I wanted to get it done today, I changed it to 1 5/8 at 11:30A. Since the Nov. 12.5s were at Ask of 4 1/8 and the Feb. 10s were at Bid of 5 3/4, this effectively represented two market orders. I expected a quick execution. Nothing happened, though that 1 5/8 spread existed for most of the remaining trading day, according to CBOE. A call to Ameritrade yielded the following explanation: "There was no volume. No interest on the other side."
My understanding was that market makers and specialists are under some kind of obligation to make a market, particularly when presented with market orders. I would think, that when MMs are presented with an opportunity to make the full spread on both sides of the transaction, they'd take advantage of it, hedging themselves if they felt the need (which they can do for just about no cost, right?).
So I'm wondering why this didn't execute, and who I should address a complaint to, if it's a valid one. I printed out a screen showing the above prices a couple of times for evidence, should I need it.
Thanks, Tuck
PS Have a good 4th, y'all! |
