E-mini protection using puts

TGregg

you wrote:

""""Quote from TGregg:

OK, an ES September 1k put is .50x3 on IB right now. Are those pure dollars - ie can I buy the right to sell somebody one September ES for $1000 for a measly three bucks, or even $1.25 if I split the spread?

Or is it "times 50", meaning it really costs 50 times what the quote is?

And 1100 is 2x8. That looks like pretty cheap insurance.
--------------------------------------------------------------------------------



Dang, it's times 50. So if you could split the spread on the September ES 1100, you could buy protection for $250 per contract. Or $62.5 for the 1000."""

Don't have the capabilities here (far as I know) to check
this out, but what would a OEX comparable put cost?
Just curious, don't waste your time unless you want to.

Stephen Szpak
 
Quote from winter:

Two points

(1) If you are heavily leveraged in something like futures the fact that the market will bounce back in a month is not any comfort - if you get a margin call the next day after the big event then you need to come up with the money right away, you can't tell your broker to sit tight and wait for the market to recover. I believe that is what the OP is asking for (crash protection)

(2) In terms of historical comparisons, how many times in the past has a fairly large sized nuke gone off in NYC or a biological agent been deployed in a major US city that killed millions? These are real possibilities and not doomsday scenarios. There are potential events that will impact the country economically, not just psychologically. A nuke going off in NYC will not spell the end of the American economy but I sure bet it will put a serious damper on it. I really hope it doesn't happen but honestly I'm surprised it hasn't already considering how much hatred towards the US is out there.
More...

1. Don't be heavily leveraged. Being leveraged to the point where you can't roll down/away multiple times is asking to have your acct taken away in whole overnight.

2. I don't think this has happened yet. Do you trade with this in mind and hedged appropriately every day? I don't. I can't. I couldn't live Taleb's life. There are some things that you just have to say are so devastating that when you wake up...if you wake up...that the last thing you would think to do is check your account balance. I just don't buy that kind of scenario as being likely. If I'm wrong, I'll probably be dead anyway and won't much care how much my short puts are going for that morning.
 
Quote from stephenszpak:

ktm

As you saying 5 puts per one long E-mini S&P 500
futures contract?

At-the-money puts?



Stephen Szpak
More...

No. Something more complex. Given most of this thread has been about just getting quotes and the mechanics of the contracts, I should leave it there for now. We need to walk before we run.
 
ktm

ktm wrote:

There are some things that you just have to say are so devastating that when you wake up...if you wake up...that the last thing you would think to do is check your account balance.

I totally understand where you're coming from here.
Of course even a rumor can change reality. What if it was
widely reported that a nuke was in a cargo container at
a port on the eastern coast. Even if there was no nuke,
you can bet that if the rumor of it was on the major networks,
non-stop from 10 AM until market close, let's say, that
the market would be substantially down for the day.

The first minute of such reporting would create a price
shock. Just trying to protect, at least somewhat, against
such things.

My Best ,

Stephen Szpak
 
Quote from TGregg:

This is one of the things that worry me, what happens if you're say long 10 ES, and terrorists nuke Chicago and Globex goes down?

When the market reopens days, weeks. months? later, ES is cut in half. -600 points times 10 times $50 is 300 large. My house isn't worth that much, but I have insurance on it. A fire or tornado or other catastrophe is very unlikely, but I still pay to be protected from a significant loss.

So I guess the answer is to buy some deep, out of the money options. Not sure how to structure it tho.
More...


Lets not nuke the merc, I work there and I would not like that very much.
 
A few comments:

The premise here by Stephan is that he is a day trader concerned with protecting himself in case of a very severe emergency.

So to begin with there is no overnight risk. Given that Stephen is a daytrader he should be able to reach over and sell immediately to exit a market....he should have a stop order, etc. I don't see the practicality of protective options for a daytrader.

But delving into it a little...it looks like these spreads between the bid/ask are huge. For example, a Sept 1000 put was quoted 2X8 this evening. I make this $100X$400. Buying and selling this each day would be stupid. The combination of commissions plus spread would be a killer.

Personally if I were that fearful of this type of daytime event, in which I would not have time to get out, then I would simply trade on the short side and forget the options. OR, I would buy the option and never get out...just keep it until it expires worthless. Buying and selling the option makes no sense whatsoever.

In the event the emergency occurs, you exercise the put if necessary which then sells the ES. It is assigned to someone short the put.

OldTrader
 
Quote from ktm:

1. Don't be heavily leveraged. Being leveraged to the point where you can't roll down/away multiple times is asking to have your acct taken away in whole overnight.

2. I don't think this has happened yet. Do you trade with this in mind and hedged appropriately every day? I don't. I can't. I couldn't live Taleb's life. There are some things that you just have to say are so devastating that when you wake up...if you wake up...that the last thing you would think to do is check your account balance. I just don't buy that kind of scenario as being likely. If I'm wrong, I'll probably be dead anyway and won't much care how much my short puts are going for that morning.
More...
1. I guess I'm working under the assumption that when this kind of bad news breaks there will not be anyone available to take the other side of your trade so you won't be able to get out. I do not believe a protective stop order will really help either, your stop will likely execute after the market has gapped right through it.

2. I don't hedge this way but I'm not the original poster and this isnt about me. I'm not sure why you would want to be financially ruined if a major city in the US that you were not living in was struck by this kind of attack (obviously if you were killed in the attack then its a moot point).

While I'm sure of all us would be very saddened by something like this, eventually we would need to get on with our lives. Being bankrupt at the same time doesn't seem like it would help your mood at all. Not sure why you are saying you will probably be dead anyway unless you are planning on committing suicide, there are always targets other than the one you are living in.

"I just don't buy that kind of scenario as being likely." Wow, I wish I could be as optimistic. I think its only a question of when, not if.
 
Quote from zf trader:

One ES put will hedge one ES contract. Make sure that the options contact exercises into the month you have the long future. ES options do not trade very much but they are pretty easy to arb so if you split the spread you should get a fill.

As far as selling at the end of the day goes it depends on your style. I really like to trade overnight futures with the protection of an option and then use the volatility of the cash open to sell my option at a profit. I think you will find the overnight market as a good place to start because the small moves and the tendency of the market to retrace itself.
More...

Hello zf trader,
do you actually buy an option every night session ? Maybe this session is easier to trade, but the range is usually not that big, last night 3 Points in the S&P, not very much... how often do you sell your option at a profit due to rising volatility ?
 
Quote from winter:

1. I guess I'm working under the assumption that when this kind of bad news breaks there will not be anyone available to take the other side of your trade so you won't be able to get out. I do not believe a protective stop order will really help either, your stop will likely execute after the market has gapped right through it.

2. I don't hedge this way but I'm not the original poster and this isnt about me. I'm not sure why you would want to be financially ruined if a major city in the US that you were not living in was struck by this kind of attack (obviously if you were killed in the attack then its a moot point).

"I just don't buy that kind of scenario as being likely." Wow, I wish I could be as optimistic. I think its only a question of when, not if.
More...

1. That has been my experience. When the shit hits the fan, (even mildly) there is no one there to take the other side. In terms of protection, I agree stops are near useless. If you are going to hedge futures with options, you must put them both on at the same time. You may be able to get in or out of futures contracts outside of RTH, but for options you don't have a prayer, so the positions need to be on ahead of time - so that means all the time.

It just seems that a nuke would have been deployed elsewhere if it was that easy to do. With all the blatant hatred throughout the rest of the world (Chechnya, Bosnia, Israel, North Africa, Syria, etc... etc...) you would think someone would have nuked somebody else by now. I'm not talking a country, just some lone nut asshole who decided to nuke instead of car bombing.

Whatever the reason, it's a lot easier to blow things up over there than in the US. We haven't had so much as a car bomb here, which suprises me greatly post 9/11. With some nukes, the land is useless for 50 or more years. Something like that in NYC would definitely put a huge dent in the US economy for many years.
 
Old Trader wrote:

The premise here by Stephan is that he is a day trader concerned with protecting himself in case of a very severe emergency.

So to begin with there is no overnight risk. Given that Stephen is a daytrader he should be able to reach over and sell immediately to exit a market....he should have a stop order, etc. I don't see the practicality of protective options for a daytrader.

But delving into it a little...it looks like these spreads between the bid/ask are huge. For example, a Sept 1000 put was quoted 2X8 this evening. I make this $100X$400. Buying and selling this each day would be stupid. The combination of commissions plus spread would be a killer.

Personally if I were that fearful of this type of daytime event, in which I would not have time to get out, then I would simply trade on the short side and forget the options. OR, I would buy the option and never get out...just keep it until it expires worthless. Buying and selling the option makes no sense whatsoever.


Thanks for the input. Just to clarify things, I'm not a trader
as yet. I wish!

I have thought about the option (so to speak) of just buying
one option and keeping it until expiration. But what if the market
moves much higher over a period of days (weeks)? One would
have to buy 1 put option every once in awhile just to
have the same downside protection one starts with at the
beginning. Sounds expensive, but maybe the only real solution.


So just to be sure:

Old Trader wrote:

"In the event the emergency occurs, you exercise the put if necessary which then sells the ES. It is assigned to someone short the put."

So if the put is exercised that is the end of it? The short futures
contract is *automatically* closed out/gone/vanishes.
{{{Sorry, for my lack of understanding regarding some of
these terms. It's really fustrating me sometimes. Others
too.}}}

Thanks,

Stephen Szpak
 
You must log in or register to reply here.
Back
Top