SPX vs. SPXW

S

SteadyOptions

I have been trading SPX and SPXW options for a while and I noticed that fills have been much better on SPXW options. This is surprising since the liquidity and the OI on SPX options (which are monthly options) is much better.

On SPXW, I was filled usually on the mid or 5 cents from the mid, while on the SPX it was all over the place. Sometimes it was on the mid, sometimes 30 cents above the mid won't get you a fill.

Can anyone share his experience?
 
SteadyOptions said:
I have been trading SPX and SPXW options for a while and I noticed that fills have been much better on SPXW options. This is surprising since the liquidity and the OI on SPX options (which are monthly options) is much better.

On SPXW, I was filled usually on the mid or 5 cents from the mid, while on the SPX it was all over the place. Sometimes it was on the mid, sometimes 30 cents above the mid won't get you a fill.

Can anyone share his experience?
More...

There are more retail and professional traders wanting to trade options that have a short time horizon. Institutions prefer longer dates options as a hedge. You will find that SPX options as they approach 7 to 10 days out will have more paper than SPXW because of their open interest.

1245
 
The main reason is probably the midpoint is a better representation of fair value in the SPXW than the SPX.

Both are single listed on the CBOE. The SPXW like all other options on the CBOE are traded on an electronic Hybrid System. Quotes are "streamed" in by many different market makers. Any quote you see can be bought immediately. There is also a pit for all CBOE options that they can be traded in open outcry.

The SPX is a bit different. The main trading takes place in the pit, rather then electronically. Only 1 market maker sends quotes into the system, hence the wider electronically quoted markets. Depending on your status as a firm or customer, your order may be sent to a broker instead of the electronic book. If it is not marketable, the broker can display it on the screen, but this order can not be "taken" electronically. If another customer wants to by the order, it will be kicked out to another broker who will have to trade it with the first broker. This is why some trades in the SPX may take awhile to fill, even if you are trying to take an offer. Since displayed markets are so wide, a small bid or offer can disguise the fair value. Your may see a market of 22-24. I put in a 22.5 bid. The mid point would change, but the fair value would stay the same.

You may want to take a look at the SPXPM as an alternative.
 
Thank you all for the replies.

I'm actually trading calendars, and I noticed how much easier the fills are when both legs are SPXW. I also see my bid when both legs are SPXW, so the mid does change, but I know that the real mid is the mid of the individual legs. With SPX, the mid does not change when I place a bid.
 
Ironically, the SPX is on the Hybrid 3.0 system, while everything else remains on Hybrid 2.0.

The good news is that later this summer, CBOE will be moving SPXQ options expiries to the SPXW symbol, meaning they will share the same platform and benefit from competitive electronic quotes. That will leave only the traditional third Friday expirations solely in open outcry.
 
trickyname said:
Ironically, the SPX is on the Hybrid 3.0 system, while everything else remains on Hybrid 2.0.

The good news is that later this summer, CBOE will be moving SPXQ options expiries to the SPXW symbol, meaning they will share the same platform and benefit from competitive electronic quotes. That will leave only the traditional third Friday expirations solely in open outcry.
More...

Didn't realize this, thank you for the information.
 
SteadyOptions said:
Thank you all for the replies.

I'm actually trading calendars, and I noticed how much easier the fills are when both legs are SPXW. I also see my bid when both legs are SPXW, so the mid does change, but I know that the real mid is the mid of the individual legs. With SPX, the mid does not change when I place a bid.
More...

Are you trading the calendars as spreads? If you are they should go directly into the COB (complex order book) with SPXW options. You should be filled between .05 and .10 of fair value. Many computers will constantly scan the COB. If you put a spread in the SPX, the brokerage house will decide based on size, etc. on whether to route it to a broker or the COB. Generally you are far better off in the COB.

When you say the mid doesn't change when you put an order in the SPX are you saying you don't actually see your bid or offer displayed? If this is what you mean, something is wrong as you should.
 
trickyname said:
Ironically, the SPX is on the Hybrid 3.0 system, while everything else remains on Hybrid 2.0.

The good news is that later this summer, CBOE will be moving SPXQ options expiries to the SPXW symbol, meaning they will share the same platform and benefit from competitive electronic quotes. That will leave only the traditional third Friday expirations solely in open outcry.
More...

So does that mean that the SPX weeklies aren't traded in the open outcry pit? Just monthly and quarterly?
 
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