Futures options newbie question

H

heech

Hi all,

Starting to look into futures options... no experience at all with these.

I was too busy during market hours to play with these, so am only trading after-hours.

I just went long on a straddle on the June 09 ES... no problems there. Now I'm trying to place an equivalent position on options for NQ... but not getting a quote through TWS.

What am I doing wrong? Why would NQ be different from ES? Or is NQ options just much less liquid, especially after hours?
 
Quote from heech:

Hi all,

Starting to look into futures options... no experience at all with these.

I was too busy during market hours to play with these, so am only trading after-hours.

I just went long on a straddle on the June 09 ES... no problems there. Now I'm trying to place an equivalent position on options for NQ... but not getting a quote through TWS.

What am I doing wrong? Why would NQ be different from ES? Or is NQ options just much less liquid, especially after hours?
More...

NQ options rarely trade AH. You're buying SPX vol here? What strike on the straddle?
 
Quote from atticus:

NQ options rarely trade AH. You're buying SPX vol here? What strike on the straddle?
More...
Gotcha, thanks. Did I just get burned on the ask/bid spread on my ES options...? I split the ask/bid pretty evenly, so I'm assuming I did okay. 905 on the put, 910 on the call.

I'm not actually trying to go long the vol. My primary (equity option) strategy is sensitive to gamma if I'm stuck in a tight range... so I'm trying out the gamma scalping strategy mentioned last week.

I figured the futures index options are a better bet than SPY options for this purpose? It's all just an experiment so far. Any advice/words of wisdom always welcome.
 
Quote from heech:

Gotcha, thanks. Did I just get burned on the ask/bid spread on my ES options...? I split the ask/bid pretty evenly, so I'm assuming I did okay. 905 on the put, 910 on the call.

I'm not actually trying to go long the vol. My primary (equity option) strategy is sensitive to gamma if I'm stuck in a tight range... so I'm trying out the gamma scalping strategy mentioned last week.

I figured the futures index options are a better bet than SPY options for this purpose? It's all just an experiment so far. Any advice/words of wisdom always welcome.
More...

Well, it's a cleaner position in terms of reval/gamma-trading with spot. You can get filled on overnight spikes. I would think a lot of your scalps will occur in the PM session, so be quick to take 1.5 sigma as price tends to overshoot.
 
Quote from atticus:

Well, it's a cleaner position in terms of reval/gamma-trading with spot. You can get filled on overnight spikes. ES is great for your intended purpose as spikes occur, but on low volume. I would think a lot of your scalps will occur in the PM session.
More...
I'm not completely sure I get you... you're suggesting that I scalp with ES at spot price instead of the future ESM9?

My intuition is that the future will be more volatile than the spot, but will still be "tied" to whatever spot value is... so it should be a better choice for gamma scalping purposes.

I have very limited experience with how ES moves over night, so this is just all a thought experiment right now. But, I'm a little concerned about scalping spikes overnight... since the whole goal is to hedge against market movement that affects the *rest* of my strategy (which only trades during market hours). If I scalp overnight but then the market opens up with an even wider gap... then my thought is I won't have hedged my actual risk.

Or are the futures "known" to over-compensate compared to next day gaps...? That there's some sort of mean reversion when the markets open?
 
Quote from heech:

I'm not completely sure I get you... you're suggesting that I scalp with ES at spot price instead of the future ESM9?

My intuition is that the future will be more volatile than the spot, but will still be "tied" to whatever spot value is... so it should be a better choice for gamma scalping purposes.

I have very limited experience with how ES moves over night, so this is just all a thought experiment right now. But, I'm a little concerned about scalping spikes overnight... since the whole goal is to hedge against market movement that affects the *rest* of my strategy (which only trades during market hours). If I scalp overnight but then the market opens up with an even wider gap... then my thought is I won't have hedged my actual risk.

Or are the futures "known" to over-compensate compared to next day gaps...? That there's some sort of mean reversion when the markets open?
More...

Spot meaning not the options. Spot is ESM9 in my example.

Sure, you may want to hedge weakly, but recently there was 500 on the bid as the market rallied 6 points, only to drop 6 when the bid was pulled. The ES is notoriously thin AH.

Leave it alone if your goal is to hedge short gamma in index-components. You will lose out on some mean-reversion, but that's unavoidable.
 
Quote from heech:

Gotcha, thanks. Did I just get burned on the ask/bid spread on my ES options...? I split the ask/bid pretty evenly, so I'm assuming I did okay. 905 on the put, 910 on the call.

I'm not actually trying to go long the vol. My primary (equity option) strategy is sensitive to gamma if I'm stuck in a tight range... so I'm trying out the gamma scalping strategy mentioned last week.

I figured the futures index options are a better bet than SPY options for this purpose? It's all just an experiment so far. Any advice/words of wisdom always welcome.
More...

I know you're just playing with scalping gammas to get a feel for it, and nothing wrong with that. But generally speaking, in my experience at least, buying premium and scalping gammas works best coming off a period of high complacency, when IV is near the low end of its historic range and has started to rise.

Right now you have nearly the opposite situation. IV has come well off its highs but has been dropping for some time, and still can't be considered cheap historically. The stock market could dive from here and your play would be a winner; otherwise probably not.
 
I'm almost amazed no one has come in this thread and turned it into an ego battle... :)

Good input, re: changing IV. In my case, I'm purely using it as a hedge... if the SPX does *not* get stuck +/- 50 pts of 905 for the next month, my other positions should make enough money to compensate for the loss here. If the SPX does get stuck +/- 50 pts... I'm hoping the gamma scalping proves a winner.
 
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