Options vs. Futures, what's better?

bone · Aug 30, 2019

FUTURES SPREADS

Yes - there are quite literally many thousands of exchange supported intra market futures spread combinations. And several hundred inter market futures spread combinations.

Intra Market example: Mar20-Jun20-Sept20 Crude Oil Butterfly (CME Nymex)

Inter Market example: Dec 21 Liffe Euribor versus Eurex Dec 19 Schatz (Euronext)

Great for swing trading, cheap to capitalize. No legging required on the exchange supported spreads - it’s a singular price DOM with internal order matching by the exchange.

ironchef · Aug 30, 2019

gaussian said:
I went through this battle. Currently I trade options on equities but I may eventually switch to futures options when my roll is big enough.

May I ask what is your rationale to switch? There is practically no size limit in options if you have positive expectancy.

I am quite happy just trading simple options. However, I do want to learn trading combinations to reduce risks in case the bull market ends.

MACD · Aug 30, 2019

ironchef said:
May I ask what is your rationale to switch? There is practically no size limit in options if you have positive expectancy.

I am quite happy just trading simple options. However, I do want to learn trading combinations to reduce risks in case the bull market ends.

Smart !

ironchef · Aug 30, 2019

MACD said:
ET sometimes is a surprise -- This time, what i perceived as the OP's Simplistic "Options vs. Futures", brings forth some really good discussion and this keeps ET alive -- even though frequently it is not well. Thanks for some good posts from out of ???

I really miss some of you old timers. Used to get a lot more help back then, when I first joined ET.

gaussian · Aug 31, 2019

ironchef said:
May I ask what is your rationale to switch? There is practically no size limit in options if you have positive expectancy.

I am quite happy just trading simple options. However, I do want to learn trading combinations to reduce risks in case the bull market ends.

Tax advantages. Futures options and stuff like options on SPX and RUT are tax advantage. It's quite easy to get raked over the coals by the tax man on a killer play with options/leveraged equities.

Windlesham1 · Aug 31, 2019

index options-everything else is rubbish!

bone · Aug 31, 2019

Yep, options on futures gets you blended capital gains tax treatment which is significant

canoe · Sep 7, 2019

heispark said:
Futures is directional bettings only while Options allows neutral composite strategies. When Kospi200 Options was introduced about 20 years ago in Korea, a retailer who retired from the biggest asset management company in Korea grew his half a million fund to 200 millions in 5 years. He said he used strangle Options strategy.

what's his name?

heispark · Sep 7, 2019

canoe said:
what's his name?

https://www.hankyung.com/finance/article/2008120379711
He's a legend in my country. Try to run google translator......

canoe · Sep 7, 2019

heispark said:
https://www.hankyung.com/finance/article/2008120379711
He's a legend in my country. Try to run google translator......

tl;dr

1. he started with $1mil (his own money + loan) in 2002
2. soon after starting out, lost $500k in a single week buying naked call options
3. abandoned options and only daytraded futures with high leverage to grow $500k to $100mil in a mere 3 years time from 2002 to 2005
4. after reaching $100mil, reduced futures trading and started focusing on straddle/strangle options
5. through these straddle/strangle options trades, achieves 20-30% annual returns from 2006-2008, growing his $100mil account to $200mil.
6. now, (time of article which is december 2008) has reduced his volume of options trading and only uses futures for hedging.

not to downplay his trading skill, but the 3-year period where he took $500k to $100mil (200x or 10,000% return) involved a ton of luck. you don't 200x your account only daytrading directional futures without taking on insane amounts of risk.

the smartest thing he did imo was realizing his fortunate circumstance and deciding not to push his luck any further with highly leveraged futures trading by the end of that 3-year period. i'm more impressed by him achieving a 100% return on his money from $100mil to $200mil over a 3-year period trading straddle/strangle options.

tl;dr of the above tl;dr

the guy basically yolo-ed his $500k account /r/wallstreetbets style daytrading futures, achieving a 10,000% (20x) return over 3 years to $100mil.

instead of then losing it all on a highly leveraged trade like the rest of the greedy /r/wsb cucks, he switched to a conservative options trading style, doubling his $100mil to $200mil over 3 years.