I'm building an automated option trading bot that executes common options multi-leg strategies (straddles, spreads) and I want to learn the best way to execute my orders.
As you know, the bid-ask spread on thinly traded or just mediumly traded option series is very large; toss-in a multi-leg, you get a bid/ask spread that's just not reasonable for price discovery.
The naive execution is to just submit a order at the full size at the mid of the bid/ask of all of your spreads. But that order is rarely best execution and if it is filled right away, you know that you could've gotten a better price.
So I'd like to seek out some papers/algorithms that can come up with the best execution for both discretionary orders and must-filled hedging orders.