NDX vs SPX vs SPY

T

tman

I've been operating a book of credit spreads on NDX optins over the last 18 months. I selected this instrument because of the favorable tax treatment vs non-cash settled indices, they are traded electronically on several exchanges, it is a big contract so commissions are small. I am not thrilled with the liquidity lately, maybe because trading in the last 2 weeks has been thin. Liquidity on spy options seems much deeper, to the point where decreased slippage would more than make up for the increased commission payed due the increased quantity traded because of small size. Should I consider revisiting SPX??
Is one of these contracts clearly a superior vehicle for positions held for a few weeks????? Thanks........Tony
 
Quote from tman:


Is one of these contracts clearly a superior vehicle for positions held for a few weeks????? Thanks........Tony
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If you can get instantaneous fills in SPX (i cannot) then give it a try. You can always change your mind again.

Mark
 
i don't usually trade SPX options, but if memory serves me correct CBOE has a monopoly on the options. Since there is no outside competition, you get crappy fills on very wide spreads and no fills in the middle from what i recall. That's probably why I don't trade SPX options.
 
There is no comparison with fills in respect to NDX and SPX. SPX market makers have a monopoly and they abuse it liberally. I have traded everything from very small to very, very large orders in both. I always recommend the NDX because of the competition and electronic fills. Have your broker call down for quotes on your spreads in both indices and you will see what I mean. As for SPX vs. SPY that would depend on your specific size, trading methodology and frequency, etc. You have to be careful with the word liquidity, the SPX has huge liquidity because you can call down and get a 50k contract spread quote without problems. Trading the equivalent 500k SPY options in one order would not be as easy. On the downside the SPX market makers will take advantage of you in anyway they can, so it is not just a question of liquidity but quality of fills as well.
 
Quote from opt789:

There is no comparison with fills in respect to NDX and SPX. SPX market makers have a monopoly and they abuse it liberally. I have traded everything from very small to very, very large orders in both. I always recommend the NDX because of the competition and electronic fills. Have your broker call down for quotes on your spreads in both indices and you will see what I mean. As for SPX vs. SPY that would depend on your specific size, trading methodology and frequency, etc. You have to be careful with the word liquidity, the SPX has huge liquidity because you can call down and get a 50k contract spread quote without problems. Trading the equivalent 500k SPY options in one order would not be as easy. On the downside the SPX market makers will take advantage of you in anyway they can, so it is not just a question of liquidity but quality of fills as well.
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Excellent. Thank you.

I route NDX spread order 5 lots at a time. It has been difficult getting mid prize executions lately, but as I said, it may be the thin volume lately. The quoted bid/ask spreads on spy are a much smaller fraction of contract size. I would only route 35 lots spreads to spy. The frequent strike provide more flexibility too. I am going start allocating some capital to spy and hopefully overcome commissions and taxes with better fills than NDX. I'm not abandoning NDX yet.
 
Quote from dagnyt:

If you can get instantaneous fills in SPX (i cannot) then give it a try. You can always change your mind again.

Mark
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Sometimes my mid-price single leg orders get taken right out. I suspect because the MMs don't want to post small quotes inside their market. All of my trading losses have resulted from legging and have sworn off it!!!! I have had trouble getting spreads filled at mids in SPX and would support their insiders game reluctantly.
 
Quote from tman:


I route NDX spread order 5 lots at a time. It has been difficult getting mid prize executions lately, but as I said, it may be the thin volume lately. The quoted bid/ask spreads on spy are a much smaller fraction of contract size. I would only route 35 lots spreads to spy. The frequent strike provide more flexibility too. I am going start allocating some capital to spy and hopefully overcome commissions and taxes with better fills than NDX. I'm not abandoning NDX yet.
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Look at ES options as well. They have the same strikes as SPX but the bid/ask spreads are much smaller, you can hedge almost 24 hours a day with the futures contract, and you still get preferential tax treatment.
 
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