Options: OEX, SPX or SPY?...QQQQ or NDX?...best to daytrade?

I've never traded /ES options but I've traded quite a bit SPY and SPX (didn't matter if it was via TOS or via IB)

Getting into a calendar in the SPX is easy, they usually filled right at the mid price.
Getting out is a different story (at least my experience).

I switched back to SPY (even though the commission is significantly higher) because I've had a hard time closing out trades that were not exactly within a percent of the short strike or because the short was a week (4-7 days) within expiration and I've had a hard time closing it.

Try to put on a one lot iron condor in the SPX and compare it with the SPY and you'll see the difference that you'll have to give up.

Now that's just the fill, and I'm usually holding for a couple of weeks. I've never day traded them but I would probably got for the SPY if I wanted to day trade, just because you can always get out easily.

my 2 cents
 
Quote from Engine99:

Getting out is a different story (at least my experience).

I switched back to SPY (even though the commission is significantly higher) because I've had a hard time closing out trades that were not exactly within a percent of the short strike or because the short was a week (4-7 days) within expiration and I've had a hard time closing it.

Try to put on a one lot iron condor in the SPX and compare it with the SPY and you'll see the difference that you'll have to give up.
More...

Are you saying that if the market is away from your strike price, you've had a hard time exiting at the mid-price, but if the market was near your strike, you didn't have too much trouble?

Honestly, this is what scares me the most - getting out of a trade when you have to and you end up selling at the bid for significant vig.

If this is the case, do you have any insight as to why this might happen? Are the locals in the pits screwing with the small fry traders?

I'm visiting the SPX pit at the CBOE again tomorrow and I'd like to be able to go in there with the right questions to ask.
 
I would say I always had trouble exiting SPX trades, it just depends how "big" the trouble was and how much I've had to give up from the mid price.

Conspiracy theory aside but I think this is exactly what I is happening (pit traders taking advantage of this due to higher risk on their end). Please ask them the question tomorrow and post the response, I'm curious as well.

Here's my reasoning (you should not listen to me).

Retail trader puts on a calendar.
Calendar works well, so retail trader wants to close the calendar and buys back the short option 4 days to expiration.
Market maker is most likely on the other side of that trade cause not a lot of hedge funds/institutions/retail traders mess with options that close to expiration, so there's no natural market. The market maker is forced to sell that option and take significant gamma and delta risk, however there's no theta for him/her to collect (4 days to expiration). If I was the market maker, I wouldn't sell the option at the mid price but would sell it at the ask.

The same is true if the option is deep in the money as well.
 
Quote from Engine99:

Please ask them the question tomorrow and post the response, I'm curious as well.
More...

Will do. Does anybody else have any relevant questions I might be able to get answered tomorrow on the CBOE floor? I'm headed over there about 9am Chicago time. Fire away.....
 
Quote from Engine99:

I would say I always had trouble exiting SPX trades, it just depends how "big" the trouble was and how much I've had to give up from the mid price.

Conspiracy theory aside but I think this is exactly what I is happening (pit traders taking advantage of this due to higher risk on their end). Please ask them the question tomorrow and post the response, I'm curious as well.

Here's my reasoning (you should not listen to me).

Retail trader puts on a calendar.
Calendar works well, so retail trader wants to close the calendar and buys back the short option 4 days to expiration.
Market maker is most likely on the other side of that trade cause not a lot of hedge funds/institutions/retail traders mess with options that close to expiration, so there's no natural market. The market maker is forced to sell that option and take significant gamma and delta risk, however there's no theta for him/her to collect (4 days to expiration). If I was the market maker, I wouldn't sell the option at the mid price but would sell it at the ask.

The same is true if the option is deep in the money as well.
More...

That makes sense, but why is it different in SPY options?

If you look at SPY options, the spread is also getting wider if you go further from the ATM strike. For example, SPY feb calls look like this:
114 (ATM) - 2.68/2.70
112 (ITM) - 4.0/4.1 (that's 2.5% between bid and ask)

SPX calls look like this:
1140 (ATM) - 24.5/25.1
1120 (ITM) - 36.7/38.5

So to buy back SPY 112 call, you would probably pay around 4.07, giving up 2 cents. But 2 cents in SPY is like 20 cents in SPX. Would it be unrealistic to expect to pay 37.8 for 1120 SPX?

Maybe the problem is psychologic - it's easy to give up 2 cents in SPY, but when you need to give up 20 cents in SPX, you feel cheated?
 
psychological is always involved but I'm not sure that's the sole reason.

The longer term options are typically fine (and putting on a spx with feb/march would fill @ the mid price or close to it I'm sure).

Look at the ones that expire this week.

Let's say you somewhat nailed the short option for the SPY and you're away a point (or close to a point) from the current price and you need to buy it back.

the SPY JAN 114 put/calls trade with a 2/3 cent wide spread and with a one cent wide spread during the day.
The SPX JAN 1140 (similar range away from the strike) trade at 8.10/9.60 and 2.70/3.20
And you can be certain that if you put a trade on you'll have to pay up and won't get filled in the middle.

Now that's expiring this week and you wouldn't hold it that long but it's somewhat like this 4-7 days before expiration as well.

Maybe I've had bad luck with the SPX but I rather pay more in commission and know I can get out easily.
 
I have been wondering the same thing as the OP, I started by looking at NDX options, figuring the higher priced underlying would hold down commissions since I'd be trading fewer contracts. The bid/ask seemed huge though. I've recently been looking at RUT, still wish the bid/ask was narrower, but it seems to have decent volume and with IWM trading at 1/10, it seems easier if you want to be able to hedge something with underlying. I'm not looking to daytrade, but I don't want to be paying through the nose in slippage and commissions each trade.
 
Quote from Sean McLaughlin:

Are you saying that if the market is away from your strike price, you've had a hard time exiting at the mid-price, but if the market was near your strike, you didn't have too much trouble?

Honestly, this is what scares me the most - getting out of a trade when you have to and you end up selling at the bid for significant vig.

If this is the case, do you have any insight as to why this might happen? Are the locals in the pits screwing with the small fry traders?

I'm visiting the SPX pit at the CBOE again tomorrow and I'd like to be able to go in there with the right questions to ask.
More...

Any additional feedback from CBOE?

I’m trying to buy the SPX mar/feb 1125 call spread. The spread bid/ask is 8.6/11.7. I started from the middle (10.15) and raised it by 5 cents every 5 minutes to 10.3, still no fill.

P.S. As I’m typing this, it got filled at 10.3. 15 cents slippage for the whole spread. Maybe I wasn’t patient enough.
 
You must log in or register to reply here.
Back
Top