As a floor broker, you are only as good as your last fill !
I’ve been a floor broker for a long time…a very long time. The past couple of years things have changed dramatically. One thing that hasn’t changed is the way that options are executed in the trading pit. The pit, or I should say various pits, are actual pits. They are circular in shape with the first few outside steps going up, and then subsequent steps leading down into, well into a pit!
Exchange members congregate in these pits to transact business. Some members, like myself, execute orders for primarily for customers. These orders can be large or small and get directed to me by upstairs brokers, trading desks, or individual clients (both speculative and industry users). For each order I execute I receive a fee. If you’re trading you’re paying this fee, hopefully to me, but if not to someone else, regardless of how you place your orders.
While occasionally paper orders match up in the trading ring, who frequently takes the other side of an order is generally a market maker. A market maker is just that, someone willing to make a market in whatever option, or structured combination of options a custmer is interested in. They provide quotes, a bid and offer price at which they will transact. That bid and offer spread comprises an initial quote and typically will change based upon market movements, competition among market makers and such. Prices are negotiated between the exchange members until an agreed upon transaction price is found. When that occurs the transaction takes place and gets reported. That is the price you will see on the screen.
Prices are consantly preparing to move, so once a quote is provided, that’ quote is only good for that point in time.
