Costs of Executing Complex Options Trades

Execution protocols for complex options orders allow market participants to execute multi-leg trades such as verticals, calendars, straddles, strangles, and others as a single trade at a net price. The costs to execute complex orders are significantly lower than the costs of simple orders. Part of the difference is explained by different characteristics of the options traded, but a large difference remains even after controlling for factors that affect trading costs. These results are consistent with the hypothesis that the differences in the ways the complex and simple orders are executed contribute to the differences in trading costs