Protective put on S&P mini futures

F

farmerjohn1324

I want to do a protective put on the S&P mini futures. This would mean buying the futures contract and hedging it by buying a put option on the same contract. My question is....

I would like to have done this with the Micro e-mini because as far as I know it's the same thing, but just allows me to subdivide more so I can be more detailed with quantities. However, my brokerage (Schwab) doesn't offer options on the Micro e-mini, only on the normal e-mini. This is despite the fact that CME website says that options on Micro e-mini do exist.

So would it amount to the same thing if I bought Micro e-mini and bought put option on regular e-mini, as long as I sized everything appropriately to account for this?
 
Pretty sure I'm gonna stick with the e-mini along with the put option. I'm having trouble seeing how to proportion them. If it were a stock, it would be 100 shares to each option contract. But the futures seem different because 100 futures contract would be like $1.4 million maintenance margin compared to one option with a $15,000 price.

Then I have to take time decay into account.
 
You can see the futures as an 100 delta option. If you want to buy a 30 delta put option your net delta will be 70 delta. For lower commission and margin you can just buy an 70 delta call option. Same risk, same result.
 
dorietrading said:
You can see the futures as an 100 delta option. If you want to buy a 30 delta put option your net delta will be 70 delta. For lower commission and margin you can just buy an 70 delta call option. Same risk, same result.
More...

Are you saying just buy one naked call option?

Why is the futures a 100 delta? Every one point the S&P moves, the futures goes up $50 for every contract (~$14,300 margin requirement). Doesn't that make it a 50delta? I'm looking at ESH22
 
No, its 100 delta. Delta has no relation with dollars.
Yes you can just buy a naked call instead of future with protective put.
 
Last edited:
dorietrading said:
No, its 100 delta. Delta has no relation with dollars.
Yes you can just buy a naked call instead of future with protective put.
More...

What's my hedge if it's just a naked call?

Edit: The hedge is that my loss is limited to the price of the purchase, correct?
 
dorietrading said:
No, its 100 delta. Delta has no relation with dollars.
Yes you can just buy a naked call instead of future with protective put.
More...

Then I would be fighting against time decay.

Does it make sense to sell a naked put instead?

Edit: No. Because they my gains are capped and my losses unlimited. Is this correct?

So time decay seems pretty significant. To combat this, is it a good idea to buy the option when it's far from expiration and sell it while it's still far from expiration? Before if I hold it too close to expiration, time decay will accelerate.
 

Attachments

  • time-decay.png
    time-decay.png
    17 KB · Views: 13
You must log in or register to reply here.
Back
Top