Execution Comparison for Multi-Leg SPX Option Spreads
⚠️ Main Risks of Using Stop Orders on Multi-Leg SPX Option Spreads
- Slippage: Once triggered, stops become market orders and can fill far worse than expected.
- Partial fills: One or more legs might execute while others don’t, creating unwanted exposure.
- Execution order issues: Brokers may fill long legs first, leaving you temporarily short.
- Skipped triggers: Fast markets can jump right past your stop price.
- Option price noise: Option prices can spike on volatility, triggering false stops.
- Broker quirks: Some stop types behave unpredictably or aren’t fully supported for complex spreads.
➡️ Conclusion: I will not use stop orders on options.
💡 Execution Comparison for Multi-Leg SPX Option Spreads
Entry (Buy/Sell Order)
• Purpose: Initiate the spread at a desired price
• Control: ✅ High — you choose price & timing
• Execution: Clean combo fill; all legs together
• Volatility impact: Manageable — you decide when to enter
• Risk: Low — minimal slippage or partial fills
Profit-Taking Order (Limit Sell/Buy)
• Purpose: Lock in profits once target reached
• Control: ✅ High — you define target level
• Execution: Usually smooth unless market gets wide
• Volatility impact: Helps when IV drops if short vega
• Risk: Moderate — may miss fill in fast moves
Stop-Loss Order
• Purpose: Automatic downside protection
• Control: ❌ Low — broker executes once triggered
• Execution: Can break apart or fill one leg only
• Volatility impact: Dangerous — IV spikes can trigger early
• Risk: ⚠️ High — slippage, skipped triggers, partial fills, broker quirks
Summary:
Entry = controlled and deliberate
Profit-taking = manageable with minor fill risk
Stop-loss = most dangerous; high slippage and execution uncertainty
➡️ Conclusion: Enter and exit profit targets manually — avoid stop-loss automation on multi-leg SPX spreads.
