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Just one minor point. Spread trades do in fact print as spread trades......they
also report as spread trades. This has to be done as a spread can touch a book
price without allowing the book order to trade. So the person who's order is in
the book knows they weren't done because even though a print did happen at their
price it was a spread print.
Gitanshu Buch wrote:
> >Is it really necessary to have bid/ask histories? Imo, most TA people
> >do not use them in their systems, even if they may be very helpful.
>
> I'll take this one for Michael:
>
> Yes it is - in fact it is the only true way to know what an option's price
> has been / is.
>
> A lot of trades in options are spread trades. When I place a spread trade,
> the prices of the individual legs are left to the discretion of the floor
> market maker. The floor usually will give a b-a quote for the spread itself,
> and when filled, they will give you the individual legs that you see print
> on the tape. These individual legs usually get "filled" at prices that have
> very little to do with the underlying at that point of time. Also, the trade
> itself may be reported late (and the underlying may have moved significantly
> away).
>
> So the off-floor trader may see some really whacky prints on individual legs
> without knowledge that the trade was a spread.
>
> They don't broadcast option quotes with any special symbol identifying it as
> a spread trade.
>
> Most services don't even broadcast the b/a on the thinner options due to
> bandwidth constraints.
>
> A good place to see this phenomenon happen is in commodities - energies and
> fixed income are 2 contrasting datafeeds. Fixed income (CBOT) breaks out
> trades as spreads or outrights, Energy (Nymex) does not. Equities/indices
> also do not.
>
> So when modelling based on "last trade" basis, one is really taking chances.
>
> Gitanshu
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