E-mini protection using puts

ktm

ktm wrote:

It just seems that a nuke would have been deployed elsewhere if it was that easy to do.

Don't forget about biological.

Also, I heard a couple years ago, that if a chemical
plant in the U.S. was hit, there could be >30,000
casualties. Some of these plants are apparently
located near population centers.

This war is everywhere. Not just Iraq.

Stephen Szpak
 
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.
More...

When an ES options is exercised, an actual ES contract is not delivered. The cash value of the underlying ES contract is instead delivered. That is, delivery is cash for ES futures as well as options on ES futures.

You will need to liquidate your futures contract position yourself when the option stops trading, at 8:30am CST, to be mostly market neutral. I say "mostly" because after the option stops trading, the special ES quote used to value the options is not necessarily set in stone. That special quote is computed based on the opening price of all securities in the S&P 500 on the Friday of expiration. All securities do not necessarily begin trading at exactly 8:30 CST. Perhps 95% of securities are usually trading by 9:00 CST. If any securities do not open for trading that day, then the last trading price of that security will be used, and the special quote will be finalized at market close, which means waiting the whole day to see what your options are worth.

Because of this uncertainty, it is recommended that most people close their options positions on Thursday (of expiration week) prior to the market close. The special ES quote hat values the options is too much of an unknown. It can end up incorporating a significant move of Friday morning, or it might not. It all depends on when the underlying securities decide to open for trading that day.

-Raystonn
 
Please note that the above information applies to options that expire the same month as the underlying futures contract only.

-Raystonn
 
So if I long ES at 1200 and buy a ES put at 1100. It still doesn't guarantee that I will lose 100 pt at most UNLESS the option premium totally reflect the underlying assets value.

Can the exchanges simply offer some futures that hv built-in loss limit? I think many traders will prefer them.


Quote from Raystonn:

When an ES options is exercised, an actual ES contract is not delivered. The cash value of the underlying ES contract is instead delivered. That is, delivery is cash for ES futures as well as options on ES futures.

You will need to liquidate your futures contract position yourself when the option stops trading, at 8:30am CST, to be mostly market neutral. I say "mostly" because after the option stops trading, the special ES quote used to value the options is not necessarily set in stone. That special quote is computed based on the opening price of all securities in the S&P 500 on the Friday of expiration. All securities do not necessarily begin trading at exactly 8:30 CST. Perhps 95% of securities are usually trading by 9:00 CST. If any securities do not open for trading that day, then the last trading price of that security will be used, and the special quote will be finalized at market close, which means waiting the whole day to see what your options are worth.

Because of this uncertainty, it is recommended that most people close their options positions on Thursday (of expiration week) prior to the market close. The special ES quote hat values the options is too much of an unknown. It can end up incorporating a significant move of Friday morning, or it might not. It all depends on when the underlying securities decide to open for trading that day.

-Raystonn
More...
 
Quote from Raystonn:

Please note that the above information applies to options that expire the same month as the underlying futures contract only.

-Raystonn
More...

Right. And remember that in all the other months (today for example) that you WILL be delivered futures contracts when options are exercised and the closing is not until 3:15 CST, not at the open like SPX.
 
Quote from richardyu301:

Can the exchanges simply offer some futures that hv built-in loss limit? I think many traders will prefer them.
More...

That's why we have trading curbs. So far, the best idea seems to be to buy some way out of the money puts when one rolls over to the next set of futures. But KTM's apparently got a more exotic (not to mention complex) idea that maybe he'll post about.
 
Quote from TGregg:

That's why we have trading curbs. So far, the best idea seems to be to buy some way out of the money puts when one rolls over to the next set of futures. But KTM's apparently got a more exotic (not to mention complex) idea that maybe he'll post about.
More...
I wonder if there is a business opportunity here, picture a future's broker that offers automatic catastrophic coverage (losses beyond 100 pt move on ES or NQ are covered) of customer positions for a certain cost per contract per time period. The broker would have to dynamically adjust/maintain a pool of deep out of the money options as customers positions and the market changes but they would be in a much better position to do it for all then each individual customer (economies of scale, cheaper commisions). They could also choose to partially self-insure if they wanted to pocket the insurance fees so they are not adjusting their option position every minute, perhaps just several times a day.
 
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.

from OldTrader
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When an ES options is exercised, an actual ES contract is not delivered. The cash value of the underlying ES contract is instead delivered. That is, delivery is cash for ES futures as well as options on ES futures.

from Raystonn
----------------------------------------------------------------------------------

. . .once I own the put, and the market
crashes, let's say, and I desire to sell the put, someone HAS
to buy it correct? {{S. Szpak}}


Theoretically, you could exercise it. But floor traders have such low trading costs, it's almost always cheaper to just sell it. Somebody will buy it just to make a little on the exercise, if nothing else.

from TGregg
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Is there agreement here? It seems that if a unlikely disaster
occurs I should:

First and foremost, exit long futures position, then:

1) sell the put

OR

2) exercise the put

Either way, that is the end of it. There is nothing left to
do or be concerned about from the trading aspect of it?

Stephen Szpak
 
Quote from richardyu301

So if I long ES at 1200 and buy a ES put at 1100. It still doesn't guarantee that I will lose 100 pt at most UNLESS the option premium totally reflect the underlying assets value.

The way I understood it, is that a large and fast move in the
underlying will always increase the option's (option premium's)
value. So if correct, you have a better, not worser chance of
at least breaking even on all this.

Just a guess,

Stephen Szpak
 
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