SPX or SP500 future options : Which ?

Digs · Aug 15, 2003

Q1:If i wish to trade the BIG SP500 option contracts which is best SPX or Sp500 future contracts ???

Q2:What is a good Future options broker for Sp500 future option contract ??I have an account with optionExpress, but they only trade SPX not futures ??

vega · Aug 15, 2003

Keep in mind that the S&P 500 contracts are 2.5 times bigger than the SPX. Each contract at the CME (S&P 500 options) can be exercised into 1 BIG S&P 500 futures contract. Also, CME options are American, so there is early excercise to consider. Next, the contracts at the CBOE (spx) are European, so there is no early exercise to deal with. If you're gonna be trading the equivalent of 20 big futures or less, liquidity should not be an issue in either product. As far as bid/ask spreads, ability to get filled in between bid/ask, it's probably 50/50. Unless you're slinging some big size, you can probably get filled in the middle (after the S&P moves against you of course). One last thing to consider, with the exception of the quarterly contracts (mar, jun, sep, dec) the SPX contracts stop trading on the THURSDAY before expiration at 3:15 and are settled to a weighted price based on FRIDAY's open, while the options at the CME trade on that Friday and are assigned/excercised based on the 3:15 CST close. Hope this helps, good luck. FWIW, I spent 5 years in these two pits working for an index arb group, both pits are very liquid (assuming you're not Merrill Lynch or Morgan Stanley) for smaller traders to get in and out. Sorry, but I don't really have a good recommendation on a broker, some others here may be able to help.

Vega

ktm · Aug 15, 2003

Do the big SPXs futs opts trade Friday? I thought the ES futs opts don't trade Fridays?

The SPX equity opts settle based on the "special opening" on Friday AM. I thought the ES futs opts did the same? IB always drops my index opts and gives the buying power back after the Friday open, but I had some ES futs opts this AM and it didn't happen. They are still in the account?

Thanks

vega · Aug 18, 2003

the options on the SP 500 futures that trade at the CME DO trade on expiration Friday, assuming that it is not a quarterly contract (mar, jun, sep, dec), however I'm not sure about the e-mini options. Hope this helps

Vega

ktm · Aug 18, 2003

Thanks Vega.

EliteThink · Aug 18, 2003

The futures options seem to be liquid enough for my purposes and I like the european style options.

Digs · Aug 21, 2003

The SPX european, just to state the obvious, I can BUY a PUT one one day and EXIT the position the next day FREELY, I do not have to hold them there entire time until expiration date !!!!

Please confirm !!!!

Sorry, I guy I know has been confusing me !

resinate · Aug 21, 2003

Quote from Digs:

The SPX european, just to state the obvious, I can BUY a PUT one one day and EXIT the position the next day FREELY, I do not have to hold them there entire time until expiration date !!!!

Please confirm !!!!

Sorry, I guy I know has been confusing me !

Right. Buy and sell whenever you like. Cash settled with no early exercise.

vega · Aug 22, 2003

You can still buy and sell them anytime you like. The difference is that with European style options you can only EXERCISE them on expiration day (or as is the case with SPX options, have them settle to the price on expiration Friday morning). But with the American style options at the CME (S&P 500 futures options) you can still buy and sell when you like, AND exercise at any point up until they expire. Hope that helps.

Vega