How difficult would it be to fill 500k SPX option contracts?

C

Con1991

As you all may be aware, there are no position limits in effect for most European style index options. Probably the most liquid of these is the SPX. Bearing this in mind, if one was to choose an arbitrary number of contracts to trade, such as 500k, what role would liquidity play with suge a huge figure. The notional value would be in the billions, but since OTM options can be dirt cheap, it could be feasible as a strategy if one were shooting for the stars so to speak.

What I would like to know is, how difficult is it to get large orders filled on index options? I am assuming market makers will be on hand to deliver if there is an edge present, of course fill price is a different story. Any insight appreciated.
 
Since I had problems finding any one option with an OI more than 50,000, I would say very hard to find 500,000 with or without a hedge with one order without moving the price a lot.

Con1991 said:
As you all may be aware, there are no position limits in effect for most European style index options. Probably the most liquid of these is the SPX. Bearing this in mind, if one was to choose an arbitrary number of contracts to trade, such as 500k, what role would liquidity play with suge a huge figure. The notional value would be in the billions, but since OTM options can be dirt cheap, it could be feasible as a strategy if one were shooting for the stars so to speak.

What I would like to know is, how difficult is it to get large orders filled on index options? I am assuming market makers will be on hand to deliver if there is an edge present, of course fill price is a different story. Any insight appreciated.
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Robert Morse said:
Since I had problems finding any one option with an OI more than 50,000, I would say very hard to find 500,000 with or without a hedge with one order without moving the price a lot.
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Yes fair point. I also accept the minimum price fluctuations would be $2,500,000. So extraordinarily risky, not to mention capital intensive.
 
Con1991 said:
As you all may be aware, there are no position limits in effect for most European style index options. Probably the most liquid of these is the SPX. Bearing this in mind, if one was to choose an arbitrary number of contracts to trade, such as 500k, what role would liquidity play with suge a huge figure. The notional value would be in the billions, but since OTM options can be dirt cheap, it could be feasible as a strategy if one were shooting for the stars so to speak.

What I would like to know is, how difficult is it to get large orders filled on index options? I am assuming market makers will be on hand to deliver if there is an edge present, of course fill price is a different story. Any insight appreciated.
More...

Since you are trading such a huge quantity, we should be asking you that question and not you asking us.
 
You need to get an ISDA and trade OTC with an investment bank or banks. Buffet had very large OTC option positions for example.
 
Con1991 said:
As you all may be aware, there are no position limits in effect for most European style index options. Probably the most liquid of these is the SPX. Bearing this in mind, if one was to choose an arbitrary number of contracts to trade, such as 500k, what role would liquidity play with suge a huge figure. The notional value would be in the billions, but since OTM options can be dirt cheap, it could be feasible as a strategy if one were shooting for the stars so to speak.

What I would like to know is, how difficult is it to get large orders filled on index options? I am assuming market makers will be on hand to deliver if there is an edge present, of course fill price is a different story. Any insight appreciated.
More...

Whatever options you buy/sell - it will be immediately delta hedged by any Tier1 desk. But before you ask about 500k options = did you do your homework on position limitations set by exchanges like CME? THAT IS THE STARTING POINT.

I have done the work for you and attached the position limits for all products at CME.

:cool:
 

Attachments

Nighthawk said:
Whatever options you buy/sell - it will be immediately delta hedged by any Tier1 desk. But before you ask about 500k options = did you do your homework on position limitations set by exchanges like CME? THAT IS THE STARTING POINT.

I have done the work for you and attached the position limits for all products at CME.

:cool:
More...
Yes I have looked at position limits for both equity options and index options. On index options such as SPX, NDX and RUT there are no position limits in effect.
 
Con1991 said:
As you all may be aware, there are no position limits in effect for most European style index options. Probably the most liquid of these is the SPX. Bearing this in mind, if one was to choose an arbitrary number of contracts to trade, such as 500k, what role would liquidity play with suge a huge figure. The notional value would be in the billions, but since OTM options can be dirt cheap, it could be feasible as a strategy if one were shooting for the stars so to speak.

What I would like to know is, how difficult is it to get large orders filled on index options? I am assuming market makers will be on hand to deliver if there is an edge present, of course fill price is a different story. Any insight appreciated.
More...

If I were you, I'd try trading 5 or 10 lots first and see how that goes.
 
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