I forgot to mention - the risk you take in placing the orders individually vs. in a combo is virtually the same.

If you place a four-leg combo order on the market vs the equivalent four orders, you will end up with four individual orders in both cases.

Your four orders will have varying states:

1) Pending fill
2) Expired and failed to fill
3) Expired and partially filled
4) Filled completely
5) I might have missed some other states depending on trading platform.

On any trading platform, you will still be responsible for handling all of these cases, and any combination of these cases with all of your option legs.

You should not be under the illusion that combos are a "safe" leg entry method. You can enter a "safe" combo and still somehow end up with a negative balance if the orders do not fill as expected. That is, unless you manage risk.

Well, this is helpful. Then how would you deal with this situation normally? Close all opened legs?

I'll check with IB to see what they have to say.

Best

Easiest method is:
1) If any filled, and at least one failed, cancel all pending orders and neutralize net position on the rest.
2) In addition to the above, it would probably be smart to send an email to yourself in the case of fill failures so that you can clean up. I hadn’t done this before but the “emailR” R package looks like an easy way to implement this.

This issue is mostly relevant when placing limit orders on each leg of a combo.

The easiest way then will be to convert limit orders not filled within a certain time period to market orders.

"
Hi Peter

If I place a combo order, like strangle, are there any possibility the order ends up with one leg gets filled while another not? I think if filled, both filled, if not, none, is it correct?

Thank you

IBCS 2018/09/04 03:54:16

If you place the order as part of a combo then the order will only trade as a combo, what that means is that you will not only get filled on one leg for example, you might get a partial fill, for example you might try to trade 10 strangles but only get filled on 5 but you will only trade strangles rather than one leg and not the other.

I hope that this is clear but please let me know if you have any further question.

Many thanks,
Peter
Risk & Trade
"

Here it is, from IB. There IS a difference between broker's platform and Zorro which should be taken care of. Look forward to your comments on this.

Best

Fascinating! If this is how IB handles combos, then I believe we have a compelling case for a feature request. I will submit a formal request later today.

Thanks,
Andrew

UPDATE:
The feature request for the IB plugin can be found here:
http://www.opserver.de/ubb7/ubbthreads.php?ubb=showflat&Number=473994&#Post473994

It would be great to clarify if limit orders are accepted for Combos

Thank you Peter, it's clear.

Can I place a limit combo order? Or it has to be market order for a combo?

Best

IBCS 2018/09/06 07:36:18
An order for a combo does not have to be a market order, the same order types that are supported on individual options are available on combos too, so yes, you can use limit orders.

Many thanks,
Peter C
Risk & Trade

This is good news.
If I read IB API docs correctly, it is also possible to request/receive pricing for the combo as a whole...

You can, but it's inadvisable in my experience.

The thing to be aware of there is that the bid/ask of the combo is not necessarily the combined bid/ask of the individual legs. IB will factor in "native" orders for that exact combo into the price calculation (including your own orders if you have any in). So for instance, if there are a couple of orders in the book for your exact straddle, the midprice quote for the spread will differ from the combined mid of the legs. This can result in you mispricing your orders if you're not careful.

This drove me crazy (and wasted some cash) until I clued into what they're doing.