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In the stock market, a limit order goes in the order book saying Someone is willing to buy 5 shares of this stock at $5.

I understand the same would be true for an options order at a particular strike. But when putting an order for a call spread or a put spread, how does that go into the order book of my broker?

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As you probably know, a credit spread involves buying a call (or put) at one strike and selling another call (or put) at another with the same maturity, so you're dealing with two orders.

Your broker will likely have to fill this order themselves, meaning that they'll have to look at the existing bid/asks for the different strikes and wait until the difference matches (or exceeds) your limit order. Obviously they can't place limit orders on the legs individually since they can't guarantee that they will both be executed. They also don't care what the individual prices are; they just care what the difference is. It's possible that they have computer systems that examine existing bids and asks that would fill your order, but it's still done by the broker, not the exchange. The exchange never sees your actual limit order; they will just see the market orders placed by your broker.

  • Historically, multi-leg orders were executed manually through brokers and by picking up the phone. However, the ability to execute these orders electronically through electronic complex order books has only gained traction in the past five years. The ISE and CBOE are said to operate the largest complex order books. flextrade.com/… – Bob Baerker Sep 29 '18 at 18:49

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