SSFs - Do they suck?

[50 cent]

Quote from lindq:

I had been led to believe that SSFs would trade in close relation to the movement of the underlying. That has been promoted as a big advantage over an option.

However, a few days ago I took a long SSF contract in BAC when it tanked, as an experiment. Since then, the stock has rallied 3 percent and the SSF hasn't budged. In fact, the SSF is actually down (!) slightly. What is particularly bothersome is that the SSF is showing a decent number of contracts being traded, so I don't think it is a liquidity issue.

I was looking forward to using SSFs on selected stocks. But not after this debacle.

I'd be interested in knowing of other experiences with SSFs.

SSF are always like that. DIA moves 30c - but the DIA SSF moves 2c. Some times there are insane spreads for no reason, and many times there is very awkward movements.

This happens so often that I believe that SSF is not a reliable instrument to trade directionally (like you trade stocks, buy lower sell higher etc.). They may be good for alternate strategies such as hedging, arbing, etc.

yoe
50

 

[lindq]

Quote from BlueHorseshoe:

Went long SBC SSFs on a swing trade and the expiration came up at an inopportune time. Thus, to keep the position I would have had to roll and pay the spread multiple times over. I won't bother with SSFs again. There is no point to it unless one needs to avoid PDT or needs to leverage up in a short timeframe.

Thanks for the responses. From my experiment, and the posts here, I can see that it is not as pure a play as I had hoped. I suspect in the case of BAC it is the issue with the dividend.

 

[BlueHorseshoe]

Quote from def:



Alternatively, you could have let it expire and rec'd the security as they physically settle in the states.

Ok, that would have worked. Frankly it was a pittance position, I had held it longer than intended, had watched my winner turn into a loser, and with expiration only days away I didn't want to deal w/ it anymore. I guess they call that tuition on multiple levels.