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Difference in price between broker and Option Samurai
Some of our users have asked us about the differences between OS prices and broker prices. Most of the difference is due to the fact that OS uses MID prices to calculate spreads, while brokers (for example, Thinkorswim or Tastyworks) use Conservative prices and bid-ask prices against you (so you can trade on the market at that price). This difference can sometimes be noticeable when calculating Iron Condors (four legs) and scanning the entire market (about 4000 stocks).
To solve this, there are several ways you can try:
1. Use the bid-ask level setting: This filter lets you control the scanner so you can scan in a conservative way (so the bid-ask prices are calculated against you: buy at ask and sell at bid) or by 25% price improvement. You can read more about it in the help article.
2. Negotiate the price with the market makers: Market makers will often stand at a predetermined spread. However, they are constantly monitoring the book and will execute trades that suit them even between the bid-ask prices. To do that, you can set the initial price at mid, and slowly adjust the price 'against you' every few seconds/minutes.
3. Make sure the stock and options are very liquid:
You can use our liquidity measures to scan only very liquid assets. This will increase the chances of seeing results that are liquid and can more easily trade. Some of the filters you can use are bid-ask spread, total option volume, option volume, open interest, etc.
4. Moneyness of the options:
Usually, it will be easier to trade OTM options than ITM options. So consider trading accordingly (so maybe switch call butterfly to put butterfly or vise-verse.
5. Give the trade 'room' to change:
Try to find trades that you can consider as 'good' trades even with small change in the execution price. Of course, we aim to get the best price we can; however, when we trade manually, it's hard to accomplish. It might be easier explained with an example:
Imagine we aim to trade a call butterfly that is riskless on the upside. Let's say we see two trades:
Trade A has a lot of profit on the upside:
While Trade B has almost no profit on the upside:
If your goal is a riskless up trade, Trade B will be harder to execute. You might consider a different trade or a trade similar to Trade A.
Prices keep fluctuating, and you can try methods 1-4 to get trade B anyway - but take into consideration it will be harder to trade.
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