SPY, SPX

F

fxintruder

Hi every body,
As I posted before I am a beginner in option trading, I have learned a lot lately, but always biased to trade directionally rather than vol. Anyway I want to try the following strategies:
A straddle (long ) on the spy that I delta hedge to compensate for daily theta.
A short strangle on spx like one standard dev wide rolled over month to month (non hedged).
Can we say that the 10 times long SPY straddle is somewhat hedging the short SPX strangle in terms of directional risk? If it's not the case, with what do you hedge the SPX?
 
The SPX...because of settlement and other considerations you really can't hedge the SPX effectively with other like kind. The SPX is more for hedging large portfolio of stocks or outright bets on the market. If you want to trade the SPX small then use the futures...the ES. Or just trade the spy.
 
fxintruder said:
Hi every body,
As I posted before I am a beginner in option trading, I have learned a lot lately, but always biased to trade directionally rather than vol. Anyway I want to try the following strategies:
A straddle (long ) on the spy that I delta hedge to compensate for daily theta.
A short strangle on spx like one standard dev wide rolled over month to month (non hedged).
Can we say that the 10 times long SPY straddle is somewhat hedging the short SPX strangle in terms of directional risk? If it's not the case, with what do you hedge the SPX?
More...

I'm not sure why you would want to do that, but yes, about 10 spy = 1SPX. If you have a portfolio margin account they offset too.
 
ES options are highly liquid even if no interest/vol you can trade, but they have very wide spreads outside of RTH, your buying power/margin changes daily so they have their own issues.
 
fxintruder said:
Thank you guys for your answers. How is the liquidity in ES options? I can't seem to find the instrument in LVX.
More...

Why not try the CME's website. They own the ES symbol and publish volume and open interest at the end of each business day. Both ES futures and options offer good liquidity (that's my opinion , I trade ES options spreads.) ES futures vol is about 1.5 million a day, ES options trade about 350,000 a day. SPY options have more volume.

http://www.cmegroup.com/market-data/volume-open-interest/equity-volume.html

http://www.cboe.com/data/mktstat3.aspx?Dy=9&Mo=5&Yr=2014&selid=SPY#SPY

As an aside, should you really be trading anything at all until you have the fundamental skills and knowledge to be able to find something as simple as volume and open interest for a specific symbol?

Best
 
rickcremer said:
Why not try the CME's website. They own the ES symbol and publish volume and open interest at the end of each business day. Both ES futures and options offer good liquidity (that's my opinion , I trade ES options spreads.) ES futures vol is about 1.5 million a day, ES options trade about 350,000 a day. SPY options have more volume.

http://www.cmegroup.com/market-data/volume-open-interest/equity-volume.html

http://www.cboe.com/data/mktstat3.aspx?Dy=9&Mo=5&Yr=2014&selid=SPY#SPY

As an aside, should you really be trading anything at all until you have the fundamental skills and knowledge to be able to find something as simple as volume and open interest for a specific symbol?

Best
More...

Hi Rick,
thank you for your answer.
Note I didn't ask for ES vlume but for its options. Actually I trade ES, and YM for years now. Below is the chart of my current ES intraday position. I also make a living by trading the FX market; here is a link to a trading journal showing real time trades I don't have time anymore to update, s. This can be useful for those interested in global macro / order flow dynamics in FX market. http://www.elitetrader.com/vb/showthread.php?t=249172&page=28
But you're right I could have found the ES options volume on TWS or CME. I am vey new to options and I try when I have time to talk with guys here since I appreciate their knowledge in options trading. I am using the Volcube simulator but it seems to me it's more market makers oriented. I also trade options while learning on LVX platform (livevol) that doesn't seem to support the ES. Anyway I made significant progress lately, since now I can understand the answers to my first posts about options.
 
FX use the SPX on live vol as a proxy...its a bit different (ES) but if you are used to trading the cash ES selling/buying an ES option against your position gives you a bit of a hedge. I traded the SPX for years so have a bit of a feel for how it moves and basically watch the market and the VIX for my guides as well as the 1600tick and slow stochastics. Again if you are comfortable trading the ES then the options are a no brainer...they move slower so you will not make/lose as much on your trade. You just have to keep in mind how the greeks are helping/hurting your over all position. You need to dictate your own price and hold to it, adjust if you really need to but just don't get pushed around. I find price will (usually) come to me.
 
fxintruder said:
Hi Rick,
Note I didn't ask for ES vlume but for its options.
More...

Understand. That's why I sent you to the CME link. The CME has ES OI and Vol. info for all the ES products including futures and options. All that info is in one spot on the CME's web site.

As an aside, please note that Livevol does not, at the present time, offer trading capabilities for any futures options (ES, NQ, etc.) They are, or so I was told recently, working on that but at the moment they're only offering equity options (e.g. MSFT, AAPL, SPY, GLD, etc.)

Finally, RichardRimes brings up a good point that anyone trading CME's options on futures should understand, i.e. margin requirements are determine by the CME's Standard Portfolio Analysis of Risk (SPAN) system which calculates "performance bond requirements" (margin) by analyzing the "what-ifs" of virtually any market scenario on a daily basis.

I have found that my credit spread "margin" requirements change daily and can vary up or down based on the SPAN system. It's something that ES traders should be aware of.

More here for those that are interested; http://www.cmegroup.com/clearing/risk-management/

Best

Best
 
You must log in or register to reply here.
Back
Top