Options: OEX, SPX or SPY?...QQQQ or NDX?...best to daytrade?
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Options: OEX, SPX or SPY?...QQQQ or NDX?...best to daytrade?
- Thread starter increasenow
- Start date
Iâm currently doing calendars on ETF and indexes. SPY calendars work pretty good, but they are very expensive commissions wise. Typical one month wide ATM calendar is about $1, and my profit target is 15%. With $0.7 per contract commission, I would pay $2.8 for round trade. Thatâs almost 20% of my potential profit and 2.8% of my invested capital. Iâm trading multiple calendars (ATM, ITM and OTM), and since ITM and OTM calendars are even smaller, and sometimes adjustments are needed, I can end up spending about 30-35% of my profit (5% of my invested capital) on commissions.
So I started looking at SPX spreads. The bid ask are ridiculous, but the volumes are huge. How realistic it is to get a fill at the middle of bid/ask or nickel/dime less?
So I started looking at SPX spreads. The bid ask are ridiculous, but the volumes are huge. How realistic it is to get a fill at the middle of bid/ask or nickel/dime less?
Quote from akivak:
Iâm currently doing calendars on ETF and indexes. SPY calendars work pretty good, but they are very expensive commissions wise. Typical one month wide ATM calendar is about $1, and my profit target is 15%. With $0.7 per contract commission, I would pay $2.8 for round trade. Thatâs almost 20% of my potential profit and 2.8% of my invested capital. Iâm trading multiple calendars (ATM, ITM and OTM), and since ITM and OTM calendars are even smaller, and sometimes adjustments are needed, I can end up spending about 30-35% of my profit (5% of my invested capital) on commissions.
So I started looking at SPX spreads. The bid ask are ridiculous, but the volumes are huge. How realistic it is to get a fill at the middle of bid/ask or nickel/dime less?
I, too, am trading calendars in SPY and have been considering making the jump to SPX for the exact same reasons you mention.
I took a tour of the CBOE floor last week and met with some people there. I was asking around if its possible for the public to get as good a fill in the SPX options as on SPY. The general consensus was that yes, you'll get as good (if not better) fills in SPX due to the very large institutional participation in that market.
Of course, I'm skeptical. They may have been just telling me what I want to here. Those people have no idea what kind of volume I trade and probably have a vested interest in driving traffic to the SPX as its one of the last of the dying breed of pit-traded products (though there is a computer-matching component).
One thing I learned when there was that the advertised bid-ask spread that the public sees on our trading platforms is in most cases FAR wider than what the actual market bids and offers are on the floor. The lesson being, try to focus on the theoretical price (or the mid-point between bid-ask) when throwing limit orders into the market place. (If you're throwing in market orders, you're begging to get fleeced).
I haven't yet begun to trade up to SPX options yet, but I probably will test the waters in the coming months. I'm eager to hear other's thoughts and experiences they may have had.
I did some quick checking comparing SPY and SPX using feb/mar 113 call calendar. The following bid/ask data was available when I was doing the calculations:
SPX feb 1130 call â 25.7/27.0
SPX mar 1130 call - 35.2/37.0
SPY feb 113 call â 2.86/2.87
SPY mar 113 call â 3.80/3.90
SPX 1130 spread - 8.2/11.3
SPY 113 spread - 0.93/1.04
The slippage for SPY would be probably around 3 cents, so for 10 contracts, you would lose $30 on slippage plus $40 commissions (assuming $1 commission per contract).
The question is what would be the slippage for SPX spread? The middle is $9.75. If itâs realistic to buy it for $9.85 and sell for 9.65, the slippage would be only $20 plus $4 commissions which is much better than SPY. Actually even buying at $9.90 and selling at $9.60 (shaving 15 cents from the middle of the spread) would still be better than SPY.
In general, I found the following spread on bid/ask for feb ATM options (as percentage of the option value):
SPY â 0.5-2.0%
SPX â 5-6%
RUT â 2.0-2.5%
OEX â 3.5-4.5%
MNX â 2-3%
NDX â 2.0-2.5%
Iâm going to trade NDX calendars, but I need a second index for diversification. SPX currently seems a good candidate, despite ridiculous bid/ask, but only real trading will prove if my theoretical calculations are correct.
SPX feb 1130 call â 25.7/27.0
SPX mar 1130 call - 35.2/37.0
SPY feb 113 call â 2.86/2.87
SPY mar 113 call â 3.80/3.90
SPX 1130 spread - 8.2/11.3
SPY 113 spread - 0.93/1.04
The slippage for SPY would be probably around 3 cents, so for 10 contracts, you would lose $30 on slippage plus $40 commissions (assuming $1 commission per contract).
The question is what would be the slippage for SPX spread? The middle is $9.75. If itâs realistic to buy it for $9.85 and sell for 9.65, the slippage would be only $20 plus $4 commissions which is much better than SPY. Actually even buying at $9.90 and selling at $9.60 (shaving 15 cents from the middle of the spread) would still be better than SPY.
In general, I found the following spread on bid/ask for feb ATM options (as percentage of the option value):
SPY â 0.5-2.0%
SPX â 5-6%
RUT â 2.0-2.5%
OEX â 3.5-4.5%
MNX â 2-3%
NDX â 2.0-2.5%
Iâm going to trade NDX calendars, but I need a second index for diversification. SPX currently seems a good candidate, despite ridiculous bid/ask, but only real trading will prove if my theoretical calculations are correct.