Selling SPX boxes for interest

[Robert Morse]

so i need the intended spread to be pre-configured in the order execution software in order for the clearing broker to see my whole spread trade for margin calculation? So all legs must be take-liquidity orders? is that the idea?

You should enter the box as a 4 leg spread.
It will not be executed as legs, but as one trade with f prints.
If you are adding or taking liquidy, I have no idea but it is likely you will be adding.

 

[entropytrading]

tried to trade ES 2750 - 2800 box but found difficult to lend 1mn which requires trading close to 100 contracts x 4 legs = crazy commission

 

[FSU]

@entropytrading I think you will have much better luck in trading the SPX for boxes. Lending 1 million would require you to do only a 4 lot of a 2500 box, so 16 contracts, so maybe $20 in commissions. You can watch time/sales for a box to go by and get an idea of what is trading for. I see some of these trading every day. Then enter it into the spread book at a price slightly better than what you want to get filled and walk the order down slowly. You will have no exercise or pin risk here as it is cash settled.

 

[Robert Morse]

tried to trade ES 2750 - 2800 box but found difficult to lend 1mn which requires trading close to 100 contracts x 4 legs = crazy commission

What price did you try to sell and what month? How did you calculate your breakeven?

 

[entropytrading]

@entropytrading I think you will have much better luck in trading the SPX for boxes. Lending 1 million would require you to do only a 4 lot of a 2500 box, so 16 contracts, so maybe $20 in commissions.

ES options tend to be more liquid but should use EV from now. I don't think 4 lots EV will result in 1mn debit?

 

[Robert Morse]

ES options tend to be more liquid but should use EV from now.

ES options do not create a credit in a margin account so there is no reason to do that.

 

[FSU]

ES options tend to be more liquid but should use EV from now. I don't think 4 lots EV will result in 1mn debit?

Not sure what you mean when you say EV, but a 4 lot in the SPX of a 2500 box is indeed 1 million. Sell the 2600 put and 100 call, buy the 100 put and 2600 call, that's 250,000 per box, x 4 is 1 million

 

[entropytrading]

right, didn't expect there would be open interests at 1000 strike

 

[Robert Morse]

right, didn't expect there would be open interests at 1000 strike

You do not need OI to do this. you need a market maker that monitors the COB and has a little edge at a price you do to.

 

[entropytrading]

right i cannot leg as there arent quotes for the crazy OTM strikes like 1000