but I bet the FXE options have huge spreads and no volume...correct?
How to trade Currency Options?
- Thread starter Wolfgang1756
- Start date
In my opinion yes the FXE options are terrible - yes huge spreads and thin volume. Hence my post.
You are quite right. When I checked last night the volume was not of that day, but of the evening session. They are traded round the clock apparently.
Now during the day the volume is high with not bad spreads. For example for the December Euro 1.50 Put the bid/ask is 0.0171/0.0176 - not excellent but better than FXE.
Everyone has different tolerances for risk... I've found CME exchange traded currency products to be safer than OTC FX.
Counterparty risk is probably the lowest of all currency products and further limits my exposure to FX broker/dealer counterparty conflicts. CME released micro future contracts and will probably follow suit with micro fx options once volume ramps up.
Counterparty risk is probably the lowest of all currency products and further limits my exposure to FX broker/dealer counterparty conflicts. CME released micro future contracts and will probably follow suit with micro fx options once volume ramps up.
So called OTC dealers of FX are scary for me. As you mention there is counter party risk. Also I have heard many horror stories of how badly the orders get executed.
With an Exchange like the CME there can be no hanky panky. And of course the money is safe.
Sadly CME's Micro Futures (1/10 the size) are a flop. Useless to trade due to low volume. Even their Mini Futures (1/2 size) are not very liquid. It is sad, because if people moved over from "FX" dealers to CME then everyone would be better off and the Micros and Minis would be wonderful to trade...
IMHO, the issues of counterparty exposure and conflict of interest you describe are the least applicable in the vanilla FX option mkt...
The liquidity you would get in vanilla FX options in OTC is multiple orders of magnitude better than anything any exchange can offer here and now. Moreover, believe it or not, exchange margin requirements are extremely punitive, compared to OTC. It's far beyond what's reasonably justified by absence of cpty risk, IMO.
Depends on your perspective... Ultimately you are trading based on the data feed provided by your broker. OTC FX you trade using non-published propreiatary data as supplied by your broker who is also the counterparty to your trades and your liquidity provider and the clearing house subject to the terms and conditions of your account agreement. Why expose yourself to such an easily manipulated game?
CME's Globex platform publishes price data and transactional data in a transparent broker agnostic manner. But like I said each person has different tolerances for risk,
CME's Globex platform publishes price data and transactional data in a transparent broker agnostic manner. But like I said each person has different tolerances for risk,
Well, it's not like we're talking about anything particularly esoteric here... Nothing is preventing me from asking 5 different brokers for a price on the same trade and putting a few counterparties in comp. Moreover, nothing prevents me from novating an existing trade to a different counterparty, if I am so inclined.
The one thing that I think we also need to consider is where the CME data actually comes from. The mkt-makers that are providing the price data are the very same people that are capable of manipulation. And it's not like collusion and other shenanigans are unheard of in the vol mkt.
At any rate, you're correct, it's all up to your individual preference in the tradeoff between risk and liquidity.
Sure, it's "private data" but still vulnerable to arbitrage, so the OTC feeds should be fine. FX futures are kind of a sideshow I guess.
Unlike what someone said here CME.com does provide free live data for FX options, futures and many other products.
Also, FX Micros are actually not bad for position trades with small accounts if only because they give you accurate interest rate carry, unlike many spot dealers or ECN brokers. (Diff between futures and spot prices -- the basis -- will show you what you'll pay or be paid to hold until expiration.) So please trade the micros!
Unlike what someone said here CME.com does provide free live data for FX options, futures and many other products.
Also, FX Micros are actually not bad for position trades with small accounts if only because they give you accurate interest rate carry, unlike many spot dealers or ECN brokers. (Diff between futures and spot prices -- the basis -- will show you what you'll pay or be paid to hold until expiration.) So please trade the micros!
For FX options, I use CME's futures options. The bid/ask on majors are tolerable. As a matter of fact, I just sold a few EUR/USD 1.48 Dec puts, the bid/ask is 0.0091 x 0.0096.
bid/ask spread for XDE/EUI/FXE are worse.
The link for CME free real-time FX quote is here:
http://datasuite.cmegroup.com/dataS....cmegroup.com/trading/fx/&selected_tab=fx_tab
bid/ask spread for XDE/EUI/FXE are worse.
The link for CME free real-time FX quote is here:
http://datasuite.cmegroup.com/dataS....cmegroup.com/trading/fx/&selected_tab=fx_tab