Liquid options with low spread

[Overnight]

Thanks for your post! My data is useless, I am not seeing anyting remotely similiar, I am seeing one bar every hour. Checked my data subscription and now got

CME Futures Level 1 and 2 for Display on Trading Platform. Examples - ES, NQ and HE...

Are you sure you're it is not something simple, like you are looking at hourly charts in real-time?

That would produce 1 bar per hour. It's all in the details.

 

[statist]

Just ignore the trolls here. You can actually click on their names and then click on the link called "Ignore" to put them on ignore and you won't see their posts anymore. This forum really does get a lot better after you've put a couple of them on "Ignore". We all have to do that from time to time unfortunately.

Ok back to your question.

First, can you elaborate more on what do you mean by "market neutral"? Are you looking for securities that do not react a lot to the market or securities that do well in all markets?

Second, with regards to the type of securities, that would depend on the investment objective, risk tolerance as well as tax planning goals and age of your client. Criteria that your client set in these areas would determine what type of security(ies) is(are) best for your client. Are you an investment advisor? If not, I think it's best you consult with an investment advisor and perhaps involve him/her in your estate planning process with your client.

We can give you some ideas but it's best that you consult somebody who is maybe more qualified to answer your questions.

Good luck!

Thank you for your reply! With market neutral I mean I do not want to take a huge risk of price changes in SP500 for example or the underlying in general. Thats why I plan to sell a call and a put way in the money maybe even only for a very short period such as 2 weeks. Sure I have vola change risk and some other "minor" risk or am I missing something substantial in terms of risk? I do have the risk that the price changes so much that one leg is not covering the other part. So I would be looking at something like 30% price change and still be in the money optionwise in case of SP500. Vola spikes up should be in my favour.

I work in the industry. The reward on the tax side is very high that is why I am thinking about this trade for my client. Client has a low to medium risk acceptance. Investment wise I would like to buy and sell market neutral futures or buy options rather, as I would be covered riskwise , but that does not cut it tax wise. I "need" to sell options as they are treated differently then the rest.

 

[statist]

Are you sure you're it is not something simple, like you are looking at hourly charts in real-time?

That would produce 1 bar per hour. It's all in the details.

Thanks for your Post! I changed settings and basically I do not see any data just like 5 dots per day, as if the instrument was illiquid. Currently I do not have trading permission for some reason for index options and cannot change it (IB Support is working on it). I can and have however traded options on single stock for years now. Maybe data is not there because I do not have trading permission currently? If I check SPX or apple stock I get a nice chart with all data so it is not some settings I fumbled. Thanks!

 

[cesfx]

Thanks for your Post! I changed settings and basically I do not see any data just like 5 dots per day, as if the instrument was illiquid. Currently I do not have trading permission for some reason for index options and cannot change it (IB Support is working on it). I can and have however traded options on single stock for years now. Maybe data is not there because I do not have trading permission currently? If I check SPX or apple stock I get a nice chart with all data so it is not some settings I fumbled. Thanks!

Option charts are not so clean even with permission and data.

I took this screenshot now, it's a 4025 Spx put, Dec exp, 1week line chart.
Candle chart would be dots lines and random candles.

 

[newwurldmn]

Wait... tax avoidance? Wow, who knew?

i don’t know how trading a liquid option will do that. Ideally you would trade an illiquid option where one entity is another entities counterparty at unfavorable pricing. With liquid options you will have different counterparties at fair pricing.

 

[newwurldmn]

i don’t know how trading a liquid option will do that. Ideally you would trade an illiquid option where one entity is another entities counterparty at unfavorable pricing. With liquid options you will have different counterparties at fair pricing.

i think he’s trying to do Karen burton accounting: Mark the premium as a loss.

 

[destriero]

i don’t know how trading a liquid option will do that. Ideally you would trade an illiquid option where one entity is another entities counterparty at unfavorable pricing. With liquid options you will have different counterparties at fair pricing.

Or simply long some skew in the taxable sufficiently OTM and short it in the deferred (spread). I am sure it would be difficult to self deal?

so he generates a large credit in the guts strangle at a discount (euro-style) or say he nets a small extrinsic figure. So what is the point? Shorting a dirty box?

 

[destriero]

i think he’s trying to do Karen burton accounting: Mark the premium as a loss.

would only work if he’s got some contractual thing which states he’s only paid on closed transactions. I think he’s attempting some tax arb and happens to be impaired.

 

[newwurldmn]

would only work if he’s got some contractual thing which states he’s only paid on closed transactions. I think he’s attempting some tax arb and happens to be impaired.

but he can’t guarantee losses in one account which is how the tax arb works.

and it’s not like spx or any of the super liquid stuff he’s looking at has any tax inefficiency priced into it

 

[destriero]

but he can’t guarantee losses in one account which is how the tax arb works.

I don’t think he’s tax-arbing with two accounts. It’s the deep credit in one account and he doesn’t know what he’s doing.

There are a million ways to do it effectively. Single name rolls in as many tickers as you like.