Duration: 4:01
Level: Advanced

The IBUSOPT Pegged-to-Midpoint order type is available for US options directed to the IBUSOPT order destination. It is useful for investors to direct nonmarketable or liquidity providing orders to the IBUSOPT order destination at the midpoint.

Study Notes:

What is the IBUSOPT Pegged-to-Midpoint order type?

The Interactive Brokers (IBKR) IBUSOPT Pegged-to-Midpoint order type is useful if the investor wishes to rest a nonmarketable order at the midpoint of the National Best Bid and Offer, more commonly known as the NBBO. The IBUSOPT Pegged-to-Midpoint order type also allows the investor to compete for liquidity by adding optional offsets to the mid-price.  If the investor chooses to use an offset to comply with the minimum tick rule, IBKR requires two offset values: a primary and secondary offset.

How to access the IBUSOPT order destination?

To access the Interactive Brokers IBUSOPT order destination from Mosaic, the investor should enter the option in the Order Entry panel, select buy or sell, the quantity they want to trade, and the limit price. Next, the investor should bring up the Advanced Panel – click on the plus sign next to Advanced. In the top left-hand corner of the panel, click on the arrow next to the Destination drop-down box, scroll down and choose IBUSOPT.

How to set up an IBUSOPT Pegged-to-Midpoint order?

Click on the order type drop down box directly above in the Order Entry panel and select Pegged to Mid.

In the Advanced panel two boxes appear below the Destination:

  • Mid Offset at Whole or a Primary offset – which must be in whole cent increments, that is applied to the spread when it is an even number of cents wide.
  • Mid Offset at Half or a Secondary offset – which must be in half-penny increments, that is automatically applied when the spread is an odd number of cents wide resulting in a whole penny price after it is added or subtracted from the midpoint price. In cases where the midpoint falls on a half-cent, this offset is automatically used. It will be set by default to $0.005 from the primary offset.

For orders where the midpoint falls on the penny, the Primary or Mid Offset at Whole is added for sell orders and subtracted for buy orders. In other words, positive offsets make the order less aggressive and negative orders make it more aggressive. This is shown as a reversal of signs in the Advanced Window and the Order Confirmation once entered.

When the midpoint falls on the half-cent, the Secondary or Mid Offset at Half is automatically applied using the same logic as above where a positive offset makes the order less aggressive, and a negative offset makes the order more aggressive.

For this example, the investor is going to add a 0.04 whole or primary offset and the half or secondary offset will automatically calculate to 0.035. Notice that the positive offset the investor entered in the drop-down box is being shown as a negative value from the midpoint since this is a buy order and the offset will be subtracted from the midpoint.

When ready, exit out of the Advanced panel, click Submit, and the order confirmation window will appear showing the Mid Offset and Whole and Mid Offset at Half amounts in the same negative signage as the Advanced Window since they were entered as a positive value for a buy order. When satisfied the order is correct, click Transmit.

The order will populate the Activity Panel’s order tab showing Peg to Midpoint in the Order Type data column, IBUSOPT in the Destination column, and the offset values in the in the respective columns: Mid Offset at Whole, Mid Offset at Half.

Additional Resources

IBUSOPT Pegged-to-Midpoint Order Type

IBUSOPT Order Destination

Leave a Reply

Note that all comments are held for moderation before publishing.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers LLC, its affiliates, or its employees.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Disclosure: Order Types / TWS

The order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock in a profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but not both. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in the marketplace.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options” also known as the options disclosure document (ODD). To receive a copy of the ODD call 312-542-6901.Multiple leg strategies, including spreads, will incur multiple commission charges.