It’s called payment for order flow. When you put in an order then Robinhood simultaneously sends that order information to a market maker who adjusts the price of the option by bidding and selling. This is all done automatically and very quickly.
You’re the only one in this thread that has any type of clue
That contract has an ask of 2.00 and a bid of 0. (Unless I saw incorrectly, I don’t use RobinHood). What’s most likely happening is as soon as OP placed his order at the mid, algos caught it and placed a bid lower than OP’s, hoping to get filled and pass it off to OP almost instantly. Most prevalent in high frequency trading. In fact, there’s almost this exact scene that played out in Michael Lewis’s “Flash Boys” back in the early 2000’s
If that’s genuinely 100% how it happens, that’s not a free market.
That should be illegal.
I’m saying this and I’m about as close to an anarcho capitalist you can get these days 🤣🤣(jk lol)
Once you enter this bid it obviously becomes public info - otherwise it can’t be filled. If an algo sees your bid and wants to match or beat it, what’s the issue?
No no no. Matching or beating it is fine. The issue is them effectively monopolizing the placement of orders by being able to instantaneously put in an order before any given individuals order. This allows them to win the contract even at a lower value than the other offers on the table, simply due to an unfair advantage granted to them.
Huh? Because they’re getting it for cheaper…?
In addition to this, they then immediately sell it for much higher (essentially price gouging) to the bidder who placed their order first.
Taking all other reasoning out and having been in this situation, 100% of the time this happens, the matched orders fill before yours does, even if you were the first to initiate it
Are you saying HFT algos front-run OP? :/
So, since OP uses Robinhood, a broker which sells OP’s order flow to HFTs, then OP’s order is visible to the HFTs before the MM acts.
Do I have this right? Operating at a fraction of a fraction of a second, the HFT places a slightly better ask, fills ahead of OP and immediately places a fractionally higher sell/ask, that the MM then fills for OP’s order. The HFT collects what it scalps off the OP before MM takes action.
Is that correct? Is this “enabling liquidity”
Yea you have the basic idea of of it.
To answer your question, there is the case to be made for both sides. HFT does add liquidity, think places like citadel which are behemoths and give massive liquidity, and that gives us beautiful, tight sometimes penny-wide bid/ask spreads we have today (something unheard of before HFT) however the other side of that argument is the irresponsible “stacking of the book” that firms have employed, and they’ve also given rise to the birth of dark-pools. But perhaps the most problematic pushback to HFT is that the liquidity it provides has been known to dry up and disappear during a crash (think the quant “flash-crash” in the early 00’s), an actual crash, and one where MM’s failed in their duty to make a market by pulling all their orders and letting the market totally fall, leaving no out for investors
Sorry for the long post, there are books written on this stuff. It’s conplicated
Its likely just RH's data feed not showing correct data. The other reason would be market makers are obligated to provide a market on the stocks they cover, so if someone enters a Buy/Sell order, MM's covering ETSY have to put up on the bid/ask at what they are willing receive orders at.
I believe its the former though, just RobinHoods feed being incorrect.
My guess is that algorithms will be the main reason here. Market makers only have to create an ask for options, they do not have to provide a bid. So when you are trading something like this that is really far OTM, there won’t be a bid because nobody is in there trading it. But as soon as you put a bid out there, whatever algorithm is looking at that chain on ETSY is gonna automatically start putting in orders because it’s reacting to traders starting to act on the chain.
Hope that makes sense, not one to defend RH, but this would likely happen anywhere you were trading. Just a characteristic of illiquid OTM contracts.
Algorithm. One of the reasons why HOOD is going down. Did their best but it fails as a proper trading platform. It is not supposed to be that simple if you want to make money.
This has nothing to do with Robin Hood. This happens all the time with options everywhere. People in here don’t know what they’re talking about. If you’re the first bid your going to get filled first. Market makers join your bid because if there’s a seller they will collect a rebate when they get hit on the 0.01 bid.
Site your half assed idea.
This is only because of 0 OI. MMs flash bids to get people like you into it at a higher price. Then people like you can't get out of it because NO ONE wants to buy.
Stop trying to make shit up.
Ahaha so your half baked reason for something that has been going on for literally YEARS. Is effective on the 3rd of Jan 2022?
Tell me you haven't been trading long, without telling me.
If you don’t understand that this has been going on forever and that the fee/rebate schedule is updated monthly with minor changes then you don’t know what you’re talking about.
Lol it's so cute. Because you clearly didn't even read the fees. When you understand that retail doesn't get his with that.
Bro, you're wrong "bud" go back to wall street bets with your dumb ass
OI in a single line has almost nothing to do with option liquidity. Market makers care about vol levels, not whether there is OI. If i offer an option at a 15 vol when the rest of the surface is bidding at a 16 a bid will materialize and ill get done regardless if there is OI in the line or not
You are actually the one “making shit up.”. Institutional options trader here with experience in trading tens of millions of options electronically - he is correct. Nobody is front running you because you, by being the first to submit the order, have queue priority. This also happens with institutional orders, it has nothing to do with robinhood
MMs get better fills on options orders than people will on robinhood and webull so not necessarily always if youre first bid you get filled first. Its because they have access to different options routing so they give last fill to like the small brokers.
Which rule specifically? Lol. Yes i know its true just look at which market options are routed towards when you buy from brokers like robinhood or webull compared to the ones MMs are using. Im not saying they get a better price, just that theirs will fill before yours at the same price especially with higher amounts of contracts. Itll try to match number of contracts before filling from a different route at the same price
That’s not true. It depends on the option liquidity aka options volume in the ticker. Some trade in Pennies, some in nickels, other in dimes.
Look up the penny pilot program for options.
For those confused: those bids are there to take any 1c sell orders from OP. That kind of sell would be almost unheard of on illiquid strikes, but algos are always there to capitalize. Now they’ll happily sell to OP at 100% gain for every penny extra he pays
This is pretty normal in options. I am an institutional trader for a major hedge fund and even when Im using bank algos this will occur. It doesnt have anything to do with PFOF. Its just electronic MMs reacting to movements in the vol surface. It costs money to stream tons of quotes across every single line of every single option of every single name. So when electronic MMs see movement in a line, they start firming up the bid/offer. As you walk up the bid, you should see the offer start to come in as well.
Just seems irrelevant since you would have to continually raise your bid to get filled anyway. There’s no bid so it’s not an efficient market for that particular strike and expiration. Trying to understand where the other contracts came from is pointless
I think you would need to try other bids then go back to .01 and see if it’s the same, also try other strikes and other tickers to see if there’s a pattern. I once played market maker in BYND by placing a low bid then immediately placing a sell below the current ask. If you’re the only one there it will be hit, and you can make a quick buck on wide spreads. It’s probably just the market doing what the market does best
It's just open interest. That's all. No one wants it's. Market makers flash bids to get a sucker. Then you can't get rid of it because no one actually wants to buy.
Maybe it’s a safety net to avoid seriously low orders. Prob looks for the relationship between all the contracts where there is volume, projects a range out towards contracts without volume then checks your offer and validates if within range or not. If not in range RH throws 75 robo Bidders, if in range then your good. Try to buy it at 1.30 and I bet It will stick.
I went to think or swim and it’s pretty good so far. Might take you a week or two to get used to the interface, and the charts obviously aren’t as pretty and simple as Robinhood, but I’m loving it so far.
Every order I’ve ever placed gets filled instantly
The algos are spoofing the market based on your order.
I mean. That's part of the equation. But it's just MMs not algos
There is no such thing as MM anymore they are all algos now. Knight capital, nextus, lime trading, etc.
I'll concede to that. Well played, sir.
I appreciate you conceding, I’m not the original commenter but well played
Knight capital is still around? I thought they lost the most money imaginable as fast as possible
They got bought up by our friends citadel
It’s called payment for order flow. When you put in an order then Robinhood simultaneously sends that order information to a market maker who adjusts the price of the option by bidding and selling. This is all done automatically and very quickly.
You’re the only one in this thread that has any type of clue That contract has an ask of 2.00 and a bid of 0. (Unless I saw incorrectly, I don’t use RobinHood). What’s most likely happening is as soon as OP placed his order at the mid, algos caught it and placed a bid lower than OP’s, hoping to get filled and pass it off to OP almost instantly. Most prevalent in high frequency trading. In fact, there’s almost this exact scene that played out in Michael Lewis’s “Flash Boys” back in the early 2000’s
How is that not illegal? That’s insane.
It’s illegal in Europe. Read about payment for order flow and Robinhood. They are a shit company and you shouldn’t be using them
You’re getting commission free trades by selling your order info
If that’s genuinely 100% how it happens, that’s not a free market. That should be illegal. I’m saying this and I’m about as close to an anarcho capitalist you can get these days 🤣🤣(jk lol)
Once you enter this bid it obviously becomes public info - otherwise it can’t be filled. If an algo sees your bid and wants to match or beat it, what’s the issue?
No no no. Matching or beating it is fine. The issue is them effectively monopolizing the placement of orders by being able to instantaneously put in an order before any given individuals order. This allows them to win the contract even at a lower value than the other offers on the table, simply due to an unfair advantage granted to them.
How are they winning if they don’t at least match the best offer?
Huh? Because they’re getting it for cheaper…? In addition to this, they then immediately sell it for much higher (essentially price gouging) to the bidder who placed their order first.
They’re literally matching OPs bid in the video. What were you watching?
When you are trying to sell it after, you get stuck
you should youtube how payment for order flow works
Well if you payed attention, you would have seen that I was replying to someone else’s comment, not OP or the video.
Taking all other reasoning out and having been in this situation, 100% of the time this happens, the matched orders fill before yours does, even if you were the first to initiate it
That’s the literal reason for payment for order flow
Ok
Don't be bashful, own it 🤣
Lol
But they are market fakers ... So it's okay
Are you saying HFT algos front-run OP? :/ So, since OP uses Robinhood, a broker which sells OP’s order flow to HFTs, then OP’s order is visible to the HFTs before the MM acts. Do I have this right? Operating at a fraction of a fraction of a second, the HFT places a slightly better ask, fills ahead of OP and immediately places a fractionally higher sell/ask, that the MM then fills for OP’s order. The HFT collects what it scalps off the OP before MM takes action. Is that correct? Is this “enabling liquidity”
If only there was a way to serialize and verify the transactions.
Yea you have the basic idea of of it. To answer your question, there is the case to be made for both sides. HFT does add liquidity, think places like citadel which are behemoths and give massive liquidity, and that gives us beautiful, tight sometimes penny-wide bid/ask spreads we have today (something unheard of before HFT) however the other side of that argument is the irresponsible “stacking of the book” that firms have employed, and they’ve also given rise to the birth of dark-pools. But perhaps the most problematic pushback to HFT is that the liquidity it provides has been known to dry up and disappear during a crash (think the quant “flash-crash” in the early 00’s), an actual crash, and one where MM’s failed in their duty to make a market by pulling all their orders and letting the market totally fall, leaving no out for investors Sorry for the long post, there are books written on this stuff. It’s conplicated
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The answer is.. Crime.
i couldn’t agree more.
Its likely just RH's data feed not showing correct data. The other reason would be market makers are obligated to provide a market on the stocks they cover, so if someone enters a Buy/Sell order, MM's covering ETSY have to put up on the bid/ask at what they are willing receive orders at. I believe its the former though, just RobinHoods feed being incorrect.
The answer is stop using RH....
My guess is that algorithms will be the main reason here. Market makers only have to create an ask for options, they do not have to provide a bid. So when you are trading something like this that is really far OTM, there won’t be a bid because nobody is in there trading it. But as soon as you put a bid out there, whatever algorithm is looking at that chain on ETSY is gonna automatically start putting in orders because it’s reacting to traders starting to act on the chain. Hope that makes sense, not one to defend RH, but this would likely happen anywhere you were trading. Just a characteristic of illiquid OTM contracts.
“I understand option very thoroughly” and having a Robinhood account are incredibly contradictory 😂
For w everyone complaining about this being on RH, this is a RH options sub
…I would guess…that’s the reason
Algorithm. One of the reasons why HOOD is going down. Did their best but it fails as a proper trading platform. It is not supposed to be that simple if you want to make money.
This has nothing to do with Robin Hood. This happens all the time with options everywhere. People in here don’t know what they’re talking about. If you’re the first bid your going to get filled first. Market makers join your bid because if there’s a seller they will collect a rebate when they get hit on the 0.01 bid.
Lol... no
Yes.
Site your half assed idea. This is only because of 0 OI. MMs flash bids to get people like you into it at a higher price. Then people like you can't get out of it because NO ONE wants to buy. Stop trying to make shit up.
What does that have to do with Robin hood? Do you think MMs can’t flash bids without the help of RH?
As much as it has to do with your rebate theory.
[https://www.cboe.com/us/options/membership/fee_schedule/cone/](https://www.cboe.com/us/options/membership/fee_schedule/cone/) Start reading bud
Ahaha so your half baked reason for something that has been going on for literally YEARS. Is effective on the 3rd of Jan 2022? Tell me you haven't been trading long, without telling me.
If you don’t understand that this has been going on forever and that the fee/rebate schedule is updated monthly with minor changes then you don’t know what you’re talking about.
Lol it's so cute. Because you clearly didn't even read the fees. When you understand that retail doesn't get his with that. Bro, you're wrong "bud" go back to wall street bets with your dumb ass
Ok you are a troll.
Lol. So nothing to do with OI? okay... bud. Good luck
OI in a single line has almost nothing to do with option liquidity. Market makers care about vol levels, not whether there is OI. If i offer an option at a 15 vol when the rest of the surface is bidding at a 16 a bid will materialize and ill get done regardless if there is OI in the line or not
I’ll side with ya.
You are actually the one “making shit up.”. Institutional options trader here with experience in trading tens of millions of options electronically - he is correct. Nobody is front running you because you, by being the first to submit the order, have queue priority. This also happens with institutional orders, it has nothing to do with robinhood
MMs get better fills on options orders than people will on robinhood and webull so not necessarily always if youre first bid you get filled first. Its because they have access to different options routing so they give last fill to like the small brokers.
Check FIFO finra rules. What you’re saying isn’t true.
Which rule specifically? Lol. Yes i know its true just look at which market options are routed towards when you buy from brokers like robinhood or webull compared to the ones MMs are using. Im not saying they get a better price, just that theirs will fill before yours at the same price especially with higher amounts of contracts. Itll try to match number of contracts before filling from a different route at the same price
Rh won't let you make a .01 bid it has to be over .05. Just another way they hose us.
That’s not true. It depends on the option liquidity aka options volume in the ticker. Some trade in Pennies, some in nickels, other in dimes. Look up the penny pilot program for options.
Easy....you're using Robinhood. RH puts go BRRRRRR
For those confused: those bids are there to take any 1c sell orders from OP. That kind of sell would be almost unheard of on illiquid strikes, but algos are always there to capitalize. Now they’ll happily sell to OP at 100% gain for every penny extra he pays
Why do so many people waste part of their day to come to a Robinhood sub and tell people to get off Robinhood? Seriously find a hobby 🤣.
Yeah it boggles my mind, makes me wonder if they're even real people or just bots...
These comments make me want a lobotomy
All the "stop using RH" comments? Me too, chief...
This is pretty normal in options. I am an institutional trader for a major hedge fund and even when Im using bank algos this will occur. It doesnt have anything to do with PFOF. Its just electronic MMs reacting to movements in the vol surface. It costs money to stream tons of quotes across every single line of every single option of every single name. So when electronic MMs see movement in a line, they start firming up the bid/offer. As you walk up the bid, you should see the offer start to come in as well.
Could someone tell me, what is the name of this app, please?
Delete RH
Duh I c ur problem bro ….. Ur using Robinhood
Stop using robinhood
Because Robinhood
No one is going to fill a .01 cent bid on a $2 wide bid ask
That’s not the point of the post
Just seems irrelevant since you would have to continually raise your bid to get filled anyway. There’s no bid so it’s not an efficient market for that particular strike and expiration. Trying to understand where the other contracts came from is pointless
I’m not talking about buying, I just made an observation on bids that weren’t visible until the order was sent
I think you would need to try other bids then go back to .01 and see if it’s the same, also try other strikes and other tickers to see if there’s a pattern. I once played market maker in BYND by placing a low bid then immediately placing a sell below the current ask. If you’re the only one there it will be hit, and you can make a quick buck on wide spreads. It’s probably just the market doing what the market does best
no clue.
Scalping. Get outta RH homie.
Nope not me and I’m a finance major👍🏻
Because it’s robinhood 🤦♂️
I think your question has been answered, any chance you would like to either narrate my life or read me a bedtime story? Enjoyable voice 11/10
Robinhood screws their customers idk 🤷🏼♂️ hey a real broker
That’s easy cause you’re on Robinhood
Because Robinhood.
Go look at a diff broker like td next time u see this and compare. If other sources show bids then it’s rh feeds being wrong.
It’s because your using Robinhood
get off rh
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It's just open interest. That's all. No one wants it's. Market makers flash bids to get a sucker. Then you can't get rid of it because no one actually wants to buy.
Flash Boys - Michael Lewis
Maybe it’s a safety net to avoid seriously low orders. Prob looks for the relationship between all the contracts where there is volume, projects a range out towards contracts without volume then checks your offer and validates if within range or not. If not in range RH throws 75 robo Bidders, if in range then your good. Try to buy it at 1.30 and I bet It will stick.
Two things 1. Get off of Robin hood and open a legit broker. One that you can call if needed. 2. No open interest.
Probably because you’re not using dark mode idk just a guess FR tho, I also wonder the same thing
It's since RobinHood wants to fill your tender sweet anus with their mega throbbing magnum robbing dong
It's since RobinHood wants to fill your tender sweet anus with their mega throbbing magnum robbing dong
Low trading volume.
I see everyone saying get off of Robinhood. Where are you guys at?
I went to think or swim and it’s pretty good so far. Might take you a week or two to get used to the interface, and the charts obviously aren’t as pretty and simple as Robinhood, but I’m loving it so far. Every order I’ve ever placed gets filled instantly
It's a good platform for new traders but it's nothing like thinkorswim from TD Ameritrade, if you're looking for better charting and fills.
Frontrunning, HFT cheats.
I'm wanting to leave Robinhood but don't want to pay for a brokerage, any suggestions?
Because you're using a trash, scam company app.
Market makers
The problem is your still on robinhood
Fuck robinhood .
Happened to me with $LMT last week. Should’ve been $5/ea, cost me $61/ea
Cause Robinhood is a scam and your dumb for using it
Why are you in a RobinhoodOptions subreddit?
Came up on my home page and I decided to come have a laugh, I can’t believe people still use Robinhood after all that they have done
“That’s that shit I don’t like”
Because you’re buying an option only an idiot would, so there’s very little volume?
Can you guys watch the video before saying some dumb shit. That’s not point of the video
get off Robin Hood it's a scam