I was trying to close out of a position today (buy to close - short call option) and had a limit order active all day long at 0.20. Near the end of the day I got anxious and raised my limit price up to 0.25 to try and see if I could just close out at an acceptable price. To my surprise (and delight), when I raised my limit price the order got immediately filled at .16 (.09 better than my limit, and even more surprisingly .04 better than the other limit order I had open all day). I am still trying to wrap my head around how this could have happened. Was there really someone on the other side of my trade who at that exact moment decided they would be willing to sell at .16 after holding out all day with the bid at .20? (this was a fairly low volume equity)
There are several possibilities:
It is as you surmised and someone showed up at 16 cents. It may or may not be the case that they were holding out all day. It could just be a lucky coincidence that your counter party showed up when you changed your order.
Strange stuff occurs on volatile days like today. People make abrupt decisions.
Sometimes people fat finger a trade, entering in the wrong price.
Market makers occasionally fill combo orders at a very different price than at the current bid or ask. For example, suppose I'm trying to buy a vertical spread for $1.50 and I'm trying to split the bids. The $50 call is $1.90 x $2.10 and the $55 call is $0.40 x $0.60. I could get filled at prices like ($2.00 -$0.50) or ($2.02 -$0.52) or even something crazy like ($2.30 -$0.80) which is far away from the market. It's possible that you were the beneficiary of being on the other side of one of these out of current price range fills.
Lastly, given that this was a 'fairly low volume equity' then I assume that the options are also illiquid. Do its options typically trade in 5 cent increments? If so, getting a fill at 16 cents makes me wonder if maker/taker fees were involved as well.
I don't know the answer but these would be my guesses.