NOTE: AVAILABLE ONLY FOR US STOCK OPTIONS
Option traders may use Pegged Volatility order types to place orders to buy and sell options according to volatility levels associated with option premiums. Rather than specifying a dollar-and-cent-based premium amount, the trader can create orders for options associated with prevailing IV readings in the market at the time the order is placed. IB offers four variations of the Pegged Volatility order type, allowing the investor varying amounts of control over the aggressiveness of the order.
Pegged to Primary – The order is pegged to the same side so that when buying options the order is tied to implied volatility matching the Bid, while sell orders are tied to volatility of the Ask price. In both cases the order can be fine-tuned by specifying an offset amount to become more aggressive than the market.
Pegged to Midpoint – Here, the starting price for either buy or sell order is the midpoint implied volatility reading between the Bid/Ask spread. As this is a mid-market average volatility reading, the target price can be made more or less aggressive by specifying an offset amount.
Pegged to Market – Unlike the Pegged to Primary style, this version pegs the option order to the opposing side. For orders to buy call options the bid is pegged to the Ask while for orders to sell options the price is pegged to the implied volatility reading on the Bid. Orders can be made less aggressive by specifying an offset amount.
Pegged to Surface - Starting prices are pegged to the model implied volatility calculated by our Model Navigator. Buy orders are pegged to the Bid and Sell orders pegged to IV readings for the Ask price.
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The Reference Table to the upper right provides a general summary of the order type characteristics. The checked features are applicable in some combination, but do not necessarily work in conjunction with all other checked features. For example, if Options and Stocks, US and Non-US, and Smart and Directed are all checked, it does not follow that all US and Non-US Smart and direct-routed stocks support the order type. It may be the case that only Smart-routed US Stocks, direct-routed Non-US stocks and Smart-routed US Options are supported.