Combination Orders

Create combination orders that include options, stock and futures legs (stock legs can be included if the order is routed through SmartRouting). Although a combination/spread order is constructed of separate legs, it is executed as a single transaction if it is routed directly to an exchange. For combination orders that are SmartRouted, each leg may be executed separately to ensure best execution. You can also create a futures EFP (Exchange of Futures for Physical) spread.

Combination orders can be transmitted as Market, Limit, or Volatility orders. For details on using the VOL order type for combination orders, see the list of criteria in the Volatility Trading topic.

You can create a unique combination by manually defining an order leg by leg on the Generic tab, or create an order or group of orders with a named strategy using a template, on either the Single or Multiple tab. You can find a template to construct the following named combination strategies:

• Box - An order to simultaneously purchase and sell two synthetics in identical numbers at different strike prices.
  For example: Buy 1 April02 95 call, Sell 1 April02 95 put, Sell 1 April02 100 call, Buy 1 April02 100 put.

• Butterfly - An order to simultaneously purchase an option with one strike price, purchase an option with a second strike price, and sell two options with a third strike price that is midway between the prices of the first two options. The ratio for a butterfly is always 1 x 2 x 1.
  For example:  Buy 10 March02 95 calls, Sell 20 March02 100 calls, Buy 10 March02 105 calls.

• Buy Write - An order to simultaneously purchase (sell) a stock and sell (purchase) a call option of the same underlying.
  Purchase a Buy Write: Sell 1 XYZ April06 95 call, Buy 100 shares XYZ
  Sell a Buy Write: Buy 1 XYZ April06 95 call, Sell 100 shares XYZ

• Calendar spread - An order to simultaneously purchase and sell options with different expiration dates, where both have the same underlying, right (call or put) and strike price. This spread is sometimes referred to as a time spread. A calendar spread whose options have different expiration dates and different strike prices is sometimes referred to as a diagonal spread.
  For example:  Buy 1 June02 100 call, Sell 1 March02 100 call.

• Conversion - An order to simultaneously sell (or purchase) a call option and purchase (or sell) a put option in identical numbers where both have the same underlying, expiration date and strike price, and purchase stock of the same underlying.
  Purchase a conversion:  Sell 1 XYZ April04 75 call, Buy 1 XYZ April04 75 put, Buy 100 shares XYZ
  Sell a conversion:  Buy 1 XYZ April04 75 call, Sell 1 XYZ April04 75 put, Sell 100 shares XYZ

• Delta Neutral - An order to simultaneously buy (or sell) options contracts and sell (or buy) a delta amount of the underlying. The quoted price is calculated as follows: effectiveOptionPrice = optionPrice + delta x (inputStockPrice - stockPrice).

• Diagonal spread - An order to simultaneously purchase and sell options with different expiration dates and different strike prices, where both have the same underlying and right (call or put).
  For example: Buy 1 June03 100 call, Sell 1 Sept03 105 call.

• Iron Condor - An order to simultaneously purchase an out-of-the-money put bull spread, and sell an out-of-the-money call bear spread, where all legs have the same expiry.
  Purchase an iron condor: Buy 1 XYX JAN08 25.0 PUT, Sell 1 XYZ JAN08 27.5 PUT, Sell 1 JAN08 30.0 Call, Buy 1 JAN08 32.5 Call.
  Sell an iron condor:  Sell 1 XYX JAN08 25.0 PUT, Buy 1 XYZ JAN08 27.5 PUT, Buy 1 JAN08 30.0 Call, Sell 1 JAN08 32.5 Call.

• Reversal- An order to simultaneously purchase (or sell) a call option and sell (or purchase) a put option in identical numbers where both have the same underlying, expiration date and strike price, and sell stock of the same underlying.
  Purchase a reversal:  Buy 1 XYZ April04 75 call, Sell 1 XYZ April04 75 put, Sell 100 shares XYZ
  Sell a reversal:  Sell 1 XYZ April04 75 call, Buy 1 XYZ April04 75 put, Buy 100 shares XYZ

• Risk Reversal- An order to simultaneously purchase (or sell) a put option and sell (or purchase) a call option in identical numbers where both have the same underlying and expiration date, but the call generally has a higher strike price.
  Purchase a risk reversal: Buy 1 XYZ April04 75 put, Sell 1 XYZ April04 95 call
  Sell a risk reversal: Sell 1 XYZ April04 75 put, Buy 1 XYZ April04 95 call

• SSF/OPT - An order to simultaneously buy (or sell) one contract of a single stock future (SSF) and buy (or sell) a stock option of the same underlying.
  For example: Sell 1 Oct06 60.0 call, Sell 1 Aug06 SSF.

• Straddle - An order to simultaneously purchase (or sell) a call and a put in identical numbers, where both have the same underlying, expiration date and strike price.
  For example:  Sell 1 Dec02 90 call, Sell 1 Dec02 90 put.

• Strangle - An order to simultaneously purchase a call and a put with different strike prices, where both have the same underlying and expiration date. In the case where both the call and the put are out of the money, this order is referred to as an inside strangle.
  For example:  Buy 1 June02 95 put, Buy 1 June02 105 call.

• Stk/Opt - An order to simultaneously purchase (or sell) one stock contract and purchase (or sell) one options contract.
  For example: Sell 1 Jan07 55.0 put, Sell 100 shares of the underlying.

• Synthetic - An order to simultaneously purchase a call and sell a put in identical numbers (or sell a call and purchase a put in identical numbers), where both have the same underlying, expiration date and strike price.
  Purchase a synthetic:  Buy 1 April02 100 call, Sell 1 April02 100 put.
  Sell a synthetic:  Sell 1 April02 100 call, Buy 1 April02 100 put.

• Synthetic Put - An order to simultaneously purchase (or sell) a call option and sell (or purchase) stock where both have the same underlying.
  Purchase a synthetic put:  Buy 1 XYZ April03 75 call, Sell 100 shares XYZ
  Sell a synthetic put:  Sell 1 XYZ April03 75 call, Buy 100 shares XYZ.

• Synthetic Call - An order to simultaneously purchase (or sell) a put option and purchase (or sell) stock where both have the same underlying.
  Purchase a synthetic call:  Buy 1 XYZ April03 75 put, Buy 100 shares XYZ
  Sell a synthetic put:  Sell 1 XYZ April03 75 put, Sell 100 shares XYZ.

• Vertical spread - An order to simultaneously purchase and sell options at different strike prices, where both have the same underlying, right (call or put) and expiration date. This spread is sometimes referred to as a price spread.
  Call vertical spread example:  Buy 1 June02 100 call, Sell 1 June02 105 call.
  Put vertical spread example:  Buy 1 March02 105 put, Sell 1 March02 95 put

For more information on combination orders and margin requirements for combination orders, see U.S. Equity Options Margin Requirements on the IB website.

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