Trading DAX futures, protection with DAX options?

K

krazy

Hello all,

I’m new to this forums, so here goes :)

I am trading DAX futures, however I had a small question in regards to the DAX options that you can buy/sell and how they relate to the futures.


First off; When looking at the DAX options in IB, it says that the options ‘multiplier’ is 5. What exactly does this me/how does it work?


Second following on question; If I am long one DAX future, and I wanted to protect my downside risk, by buying an ‘At-The-Money’ (ATM) DAX Put option, what is the ratio needed to provide complete protection? (I realise that I will still have at risk the premium I paid for the option(s), but no more)

If I buy 1 future, and just 1 ATM Put, that obviously does not seem to cover me completely and I will still require huge overnight margins.
Is it 5 options to every 1 future contract, in order to equally counter-balance them?

Basically, I should be able to own DAX futures, and buy puts against them, and reduce any large overnight margins I have to a margin that is only the cost of whatever I paid for the put options ... limitied/known risk ... no?
I am just wondering how the mechanics of it works, and what the ratio of Options-to-Futures is.

And I’d just flip the whole thing over if I were selling futures . . .

I may have a few more questions coming, but I was hoping that there would be somebody who may be able to help . . . it would be greatly appreciated :D

Thankyou kindly for your time,
Regards,
KJ
 
I can't say that it is a good idea to ban members that contribute to the board, while hundreds of garbage spewers lurk,

The options on Dax multiplier is 5 while the future are 20. You may want to look at Eurostoxx 50 futures and options that I believe have the same multiplier and would be margined as such. Not to metion that Eurostoxx 50 is at least as liquid as dax futures
 
Hi, thanks for the reply :)

So basically, if i read you right, i need four DAX options to cover one DAX future, margin wise?

And i'll certainly check out the other alternative you suggested.

Thanks again,
Cheers
KJ
 
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