SPXU and SPXU1

[Tom Wilson]

I am currently holding SPXU1 Options expiring 1/17/2020.
My questions are:
1. What is the difference between SPXU and SPXU1 ?
2. Will the SPXU1's skyrocket when the Market Crashes or the DOW goes to 6000 ?
Tom Wilson

 

[tommcginnis]

SPXU is the underlying contract to option series SPXU1.

Lots of detail would be available on your platform, including notional value, tick size, margin requirements, and trading hours [RTH and 'extended hours'. (Also, these things are not set in stone, so rather than nailing them in your memory, know how to find them out with a couple of clicks.)

 

[FSU]

SPXU1 was created after SPXU reverse split 4 to 1. Normally an option represents 100 shares, but SPXU1 represents 25 shares of SPXU. If you are holding call options, yes they should go up if the Dow goes down to 6000, SPXU is a reverse levered index of the SPX.

 

[FSU]

Liquidity looks really bad here. I would suggest if you open any new positions you should do it in more liquid index options such as the SPX or SPY.

 

[Tom Wilson]

Thanks Tom.
Your point about Liquidity interests me here.
How do you assess liquidity or are you referring to the decay heading towards the Expiration Date ?

 

[tommcginnis]

Thanks Tom.
Your point about Liquidity interests me here.
How do you assess liquidity or are you referring to the decay heading towards the Expiration Date ?

Not to answer for FSU, but liquidity in often a volume issue -- but what jumped out at me here was the spread between bid and ask: $5???? YOW.

 

[FSU]

Thanks Tom.
Your point about Liquidity interests me here.
How do you assess liquidity or are you referring to the decay heading towards the Expiration Date ?

Your options, zero volume and $5 wide markets, SPY, lots of volume, .05 wide markets in January 2020 options, SPX very tight as well and 10x the SPY.

 

[Tom Wilson]

So what do you suggest I do with my SPXU1's and what should I buy if I want crash protection ?

 

[Tom Wilson]

Tom,
I won't trouble you much more but you may wish to contact me via my work email.
wilson.tom1@bigpond.com
I attach a chart and ask what you would do with say $6,000 ?

 

[FSU]

Tom,
First I would suggest that you take out your email from your last post, or simply edit it in a way it wont be easily readable to the bots.

I am not really able to make a recommendation of how you should spend your money on hedging. So many factors, put spreads, deeper puts, selling calls, longer dated, etc. So many choices based on your risk appetite, etc.

As I mentioned in an earlier post, the advice I would give for your future purchases, is to stay in the more widely traded indexes as the SPX or SPY. Looking at your chart, you have traded options in very illiquid products. The problem here is you are giving up so much edge with every trade. If you trade an option with a 6 dollar wide market (which it seems many of these do), it is difficult to determine what is the "fair value", which is not always the midpoint. Market Makers will also need more "edge" to make the trade. So you may end up paying far more then fair value to enter the position and selling for far less to get out. With the liquid indexes, you may only pay a penny or two over fair value.