Jim, I'll give you the one warning or problem I've come across doing this.
I like to trade in even 1000 shares lots, but have found out if you place an all or none order for 1000 shares, your AON order DOES NOT have to be reflected in the best consolidated quote, ie if the current spread is 40 by 40 1/2 and you place an AON order to buy at 40 1/16, the quote does not have to update to reflect your current best bid. You can just place an order to buy at 40 1/16 and the quote does have to update to reflect your order. The problem I've had is that after doing this a couple times, I think the real market makers start catching on and get pissed at you for cutting into their profits on the spread. What they start doing to me is filling me for some small amount of shares at 40 1/16, like 100 or 121 or 211, etc, and then they move there own bid up to 40 1/8 to shut you out. Now you're stuck with only 100 shares that you were going to flip fast for 1/4 or 3/8, but with only 100 shares, now you're not even going to clear enough to pay commissions. I think they realize this and try to burn you with a 100 share fill. In this case a no fill would be better than 100 shares. So just be aware of the games they're going to play with you. But it does work. I've made money on about 9 out of 10 trades trying to scalp the spread. Of course if you were going to make the trade based on your expectations of the stock moving up rather than just scalping the spread, this isn't so important. If they update they bid to 40 1/8, you just update yours to 40 3/16. Also, FWIW, I've found that I have a much better chance of a total fill if I try and buy 500 shares of a $80 to $100 stock than if I try to buy 1000 of a $40 stock. It is fun and different though, kind of like a chess match with the market makers.
Steve |
