I'm not sure you understand how futures are priced. The difference between trading ES and trading SPY are almost entirely academic for your average trader, if the market goes up 2.1% Monday then both ES and SPY will both go up exactly 2.1% When it comes to index futures like ES the future price is directly mechanically tied to the current and future spot price taking into account dividends and interest rates. The March futures wouldn't be "high" if people thought the S&P 500 were going to rise by March or "low" because they thought it was going to fall by March. No guessing going on here. If you're interested, there's a risk free arbitrage opportunity that would exist if this wasn't the case. See if you can figure out what it would be, I'll help if you get stuck.
Futures or Options
- Thread starter Chris Paciello
- Start date
I say options are better as long as you're not writing calls or puts. The reason being is you can only lose what you put into the pot. You don't get a margin call when a trade spikes the wrong way. A black swan event wont wipe you out either.
Of course you're right if someone was to trade the same number of options as they would the underlying shares. Unfortunately almost no-one in the OPs position trades options that way, they just lever up to whatever the product they're trading will let them trade and all those positives you mention become negatives.
Futures are derivatives.
Options are derivatives of derivatives.
Obviously futures are ‘simpler’ to trade because it’s purely a price bet.
Options offer a lot more intricacies and variables on which to trade.
Risk appetite as it relates to your portfolio size is the question you need to address.
Options are derivatives of derivatives.
Obviously futures are ‘simpler’ to trade because it’s purely a price bet.
Options offer a lot more intricacies and variables on which to trade.
Risk appetite as it relates to your portfolio size is the question you need to address.
??? Where did I say anything about that? All I am saying is that with options you have a lot more possibilities to make money than with futures. More versatile. And my example was to show that when you sell an option for example, you can make money even if you are slightly wrong on direction. You make money if underlaying goes up, stays the same or even goes down slightly (depends on the strike sold). How can you do that with futures please? This was all that I wrote about. Not about the difference between SPY, ES, SPX lol..
My apologies, I misread "With futures, you HAVE to guess where underlaying will go or you loose money." I now see the point you were trying to make with that.
I would caution that there are extra degrees of freedom in an option that mean that your analysis might not be accurate. For example, you could sell an option for $1 and the underlying implied vol could go up such that the option is now selling for $2.10 even if the underlying price doesn't move. If the person who bought your option then exercised, you just lost all your money and then some.
I can speak from my experience way back as an 18 year old, the problem with options is that most people buy a book that explains the mechanics of how an option works on the basic level, i.e. you sell a call, you get the premium, you make the premium if it goes down or lose the closing price - strike - premium if it goes up. They master that, which is more complex then stocks, and now they feel they've got the options thing wired. Not even realizing the entire universe of the greeks and BS (and all the alternatives to BS) and volatility surfaces and so much more are out there. It wasn't until grad school I realized how much I didn't know I didn't know about options. Now I'm just at the point where I know there's a lot I don't know!
Extremely appreciate the feedback from everyone! Been a huge help.
Just to add a question into the mix - again, just some personal thoughts and ideas.
I remember DBPHOENIX used to trade NQ only.
Was even told that ES is more for ‘professionals’
Would you trade NQ or ES if you were to focus on one specific market?
Do you think it’s beneficial Trading one market or is it better to trade multiple?
I like the thought of one over multiple as you can develop a good ‘feel’ for that one by putting sole focus on it. But I also feel having multiple markets to watch will allow you to open up to more opportunities as well.
But something like NQ vs ES they have similar patterns where when is setting up for an opportunity there is a high probability the other is as well.
Also, anyone ever try FuturesTrader71 method to trade? Been debating on signing up at his new Convergent site. Seems like you get a lot of info and value for the cost.
I’m interested in learning Market/Volume Profile, Order Flow - FT71 comes up as highly regarded for that.
Anyone know any others as well?
Thanks again to everyone who shared their thoughts on this thread. Helped me out immensely and gave me more clarity on things.
Just to add a question into the mix - again, just some personal thoughts and ideas.
I remember DBPHOENIX used to trade NQ only.
Was even told that ES is more for ‘professionals’
Would you trade NQ or ES if you were to focus on one specific market?
Do you think it’s beneficial Trading one market or is it better to trade multiple?
I like the thought of one over multiple as you can develop a good ‘feel’ for that one by putting sole focus on it. But I also feel having multiple markets to watch will allow you to open up to more opportunities as well.
But something like NQ vs ES they have similar patterns where when is setting up for an opportunity there is a high probability the other is as well.
Also, anyone ever try FuturesTrader71 method to trade? Been debating on signing up at his new Convergent site. Seems like you get a lot of info and value for the cost.
I’m interested in learning Market/Volume Profile, Order Flow - FT71 comes up as highly regarded for that.
Anyone know any others as well?
Thanks again to everyone who shared their thoughts on this thread. Helped me out immensely and gave me more clarity on things.
I agree with you, I thought I know about options too, until I got burned.. But it was totally my fault anyway, thinking increased volatility will subside quickly..
Options really give you way more options to play the markets than futures do. You can gain on time passage, you can gain on volatility shrinking or rising etc etc.. Depends on what your view is and what you want to play. But it is usually us who fuck it up by poor timing, over-leveraging, totally wrong view on underlaying, thinking low volatility will continue into the future, thinking 4 sigma event only happens once in a blue moon or a combination of it all
But sure, if someone want to play strictly directional moves only, it is probably better to do it with futures or so. But getting options knowledge is you ask me is still good, if for nothing else for hedging purposes..
Options really give you way more options to play the markets than futures do. You can gain on time passage, you can gain on volatility shrinking or rising etc etc.. Depends on what your view is and what you want to play. But it is usually us who fuck it up by poor timing, over-leveraging, totally wrong view on underlaying, thinking low volatility will continue into the future, thinking 4 sigma event only happens once in a blue moon or a combination of it all
But sure, if someone want to play strictly directional moves only, it is probably better to do it with futures or so. But getting options knowledge is you ask me is still good, if for nothing else for hedging purposes..