If the amount of contracts to sell is about 2-3 times the average daily volume, the bid size is usually higher than the contracts to sell, the ask premium price is about 8% above the bid, how would you sell the options with maximum return? Would you just sell all in an order at the bid price, or break them down into small orders and sell them at mid price between bid and ask?
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Use a dark or hidden order if your broker offers them. Also take a peek at the level 2 quotes window, most of the time you'll see the MM have thousands of contracts at the bid/ask, just under the surface, even on low volume contracts.– Knuckle-DraggerMar 15, 2015 at 19:58
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2 Answers
If the market is illiquid it might be worth putting limit orders selling above the bid. Then market makers will have no choice but to fill your orders at your favourite price or leave it. Make sure to allow partial fills.
If your orders don't get filled quick enough, then you know you need to lower your limit price. It all depends on how urgently you need to sell.
This is really no different from selling other assets than options.
This is a very subjective question.
Assuming you want to liquidate options in the amount triple the average daily volume... You should probably not sell them at market.
Depending on the nature of the options, I would behave in different ways...
With little volume in the option you could trade the opposing option and execute both.
If your expiration is far and the security looks in the direction of the options position I might take the opposing securities position against the options.
I think you'll need to elaborate quite a bit more to get a reasonable answer.
