Can a Large Options Trade on a Public Exchange Be Front-Run? ⎊ Path

Can a Large Options Trade on a Public Exchange Be Front-Run?

Yes, a large options trade can be front-run. If a large order for an option contract is submitted, market participants can observe this on the public order book.

Knowing the option's delta, they can quickly place trades in the underlying asset or other related options to profit from the anticipated price impact that the large options trade or its subsequent hedging activity will cause. This is especially true if the options trade signals a significant directional view.

How Do ‘Iceberg Orders’ Attempt to Minimize Market Impact on Public Exchanges?

Can Front-Running Occur on a Request for Quote (RFQ) Options Platform?

How Does a Request for Quote (RFQ) System Differ from an Order Book Exchange in Derivatives?

How Does a Decentralized Exchange’s Automated Market Maker (AMM) Model Handle Slippage Differently than a Traditional Order Book?

What Is the Concept of “Iceberg Orders” and Their Effect on Order Book Transparency?

How Does the Concept of an Order Book Relate to the Impact of a Whale’s Large Sell Order?

How Does the Lack of a Central Order Book on an Automated Market Maker (AMM) DEX Change the Nature of Front-Running?

How Does the Transparency of a Public Order Book on a DEX Enable Front-Running?

Glossar

Public Exchange

Venue ⎊ A public exchange, within the context of cryptocurrency, options, and derivatives, functions as a formalized marketplace facilitating standardized contract trading and price discovery.

Anticipated Price Impact

Impact ⎊ Anticipated price impact quantifies the expected change in an asset's market price resulting from the execution of a specific order size.