E-mini protection using puts

[Prevail]

This whole discussion would be easy if the 'insurance' did not cost as much.

Some ideas to buy insurance for less are:

Buy long dated puts and sell before they become front month to voice high theta exposure

Pay for the put by selling a corresponding OTM call

Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put

Set up the sling shot trade in 'coulda, woulda, shoulda.

 

[ssternlight]

Quote from richardyu301:

http://www.cme.com/trading/prd/equity/index14237.html

Daily Settlement Price Determinations to Change on Five CME Futures Products
Beginning Monday, August 15, 2005, CME will change the daily settlement price determination process for the following CME Equity futures contracts:

* CME® Russell 2000® futures
* CME E-mini Russell 2000 futures
* CME S&P MidCap 400™ futures
* CME E-mini S&P MidCap 400 futures
* CME Nikkei 225 futures (dollar-denominated)

Currently, the daily settlement prices for CME E-mini Russell 2000 and CME E-mini S&P MidCap 400 futures are determined by the daily settlement prices of their regular-sized counterparts -- CME Russell 2000 and CME S&P MidCap 400 futures, respectively. For the CME Nikkei 225 dollar-denominated futures contract, which is traded side-by-side (via open outcry and electronically), daily settlement price is based on the open outcry market.

Starting Monday, August 15, 2005, the daily settlement prices for CME E-mini Russell 2000, CME E-mini S&P MidCap 400 and CME Nikkei 225 dollar-denominated futures will be determined by referencing their respective market conditions on CME Globex®.

Also effective on that date, the daily settlement prices for the regular-sized CME Russell 2000 and CME S&P MidCap 400 futures contracts will be determined by the settlement prices of their CME E-mini counterparts.

This change will not affect the daily settlement price determinations of the CME E-mini S&P 500®, CME E-mini NASDAQ-100® or the CME Nikkei 225 yen-denominated markets.

What does it mean when they say "closing prices will be determined by referencing their respective market conditions?" Does this mean that the last price on globex will be the settlement price for the Russell? That could be a nasty few minutes given how thin the trading is....

 

[stephenszpak]

Quote from porgie:

my 1 contract and 5 pt stop was just a suggestion for someone who is concerned about the sky falling at any moment....who also should not be trading until that psychological issue is resolved...

I'm talking about a once in twenty years event. Think
about what would have happened on Sept 11th if all
the attacks occured at lunch and at Washington. I do
worry excessively, but calamities do occur as well.

P.S. Doesn't mean we have 10 or 15 years until
something really bad happens. Terrorist or other.

Regards,

Stephen Szpak

 

[stephenszpak]

Quote from Prevail:

This whole discussion would be easy if the 'insurance' did not cost as much.

Some ideas to buy insurance for less are:

Buy long dated puts and sell before they become front month to voice high theta exposure

Pay for the put by selling a corresponding OTM call

Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put

Set up the sling shot trade in 'coulda, woulda, shoulda.

I sort of understand these two:

Pay for the put by selling a corresponding OTM call

Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put

http://www.asx.com.au/investor/options/how/library/StrategyofWeek280303_AM4.htm

Does the top one have a name?

Both can involve early exercise (OEX, let's say) correct?

Stephen Szpak

 

[Prevail]

Quote from stephenszpak:

I sort of understand these two:

Pay for the put by selling a corresponding OTM call

Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put

http://www.asx.com.au/investor/options/how/library/StrategyofWeek280303_AM4.htm

Does the top one have a name?

Both can involve early exercise (OEX, let's say) correct?

Stephen Szpak

Financing a put with a call when the strikes are different is essentially a synthetic underlying with a smaller delta. Early assignment would be the risk on any american style, yes.

 

[stephenszpak]

Quote from Prevail:

Financing a put with a call when the strikes are different is essentially a synthetic underlying with a smaller delta. Early assignment would be the risk on any american style, yes.

Thanks. So what is the savings, if any?

To keep costs down, one would have to assume a, let's
say,a 40 point drop in the E-mini S&P 500 futures BEFORE one could
exit one's long futures position, (were still talking about
day trading here). I say "to keep costs down" because the
puts would be very cheap to buy.

For simplicity, for now, perhaps comments
could be made regarding the options on the E-mini S&P 500
futures. (Sorry to mention the OEX, its just more familiar.)

One has to consider the different option strategies and
commisions, and that they would have to be implemented
repeatedly if the market moves up over a number of days
(or hours). This *will* be more complicated than just buying
a deeply out-of-the-money put every so often.

Stephen Szpak