How-To Control the Order Pricing Algorithm

Why a pricing algorithm

Roger always opens orders at or near the market price; the mid-point between the bid and ask. Most of the time this is a pretty small gap, but during times of high IV the bid-ask spread can be quite large which leads to difficulty getting orders filled, especially for bots and trading algorithms.

What can we do?

The pricing algorithm starts at the mid price and then waits for an order fill. If there is no order fill, then the bot will adjust the price to get filled. It will try up to 10 times but usually it will hit the min/max configured price or the bid/ask well before that.

How you control the pricing algorithm

You have a couple of settings that allow you to control how aggressive the pricing algorithm is in getting filled. These are the Buy order offset and Sell order offset. For example, if the bot is selling a put option on an equity where the bid is 0.90 and the ask is 1.10, it will open the order with a price of 1.00, the market price. A Sell order offset value of 0.1 would allow the bot to walk the price down to 10% of the bid/ask spread over the bid. In this case the bid ask spread is 0.20. 10% of that is 0.02. So the algorithm would drop the price in small increments until it gets to 0.92 at which point it would get filled or give up.