Trading ES options vs. ES

J

joneog

I've traded ES for many years and have recently considered ES options to compliment and partially supplement what I'm doing. If you've traded both, or the options, I'd appreciate your thoughts / criticisms on the following:

The way ES trades (alot of chop, retests, fake-outs, backfill etc.) I find myself more-and-more not maximizing winners like I should, getting caught up in the noise. It's not a question of trading too big IMO since I use a relatively conservative margin. (Long) options may fit my more binary, risk-adverse, big R/R approach a bit better.

So, I was wondering if the trade-off between the theta, lower liquidity, and vega risk to the downside (long vol obviously, if vol is high I'll prob go with verticals or stick with ES) is worth the gamma; vega on the upside; ability to customize risk/return profile; ability to use a soft stop; and with pre-defined max-risk eliminating catastrophe risk to account from terrorist attack, suprise fed move, sovereign default (a type of loss insurance against 50-100 handle black swans) etc.

Most of these trades would be intraday-swing trades, some may last 2-3 days. No hard-stop but will have certain time/loss exit provisions so as to limit the decay. Comm. will be similar.

I realize this is a somwehat subjective thing, but I was curious if others have weighed the pro's and con's and what they found.
 
If you are comfortable trading SPX options then I think you will much prefer ES options. Trading the options are very different than trading the cash ES. More for swing trading. Very liquid and you can get in or out after regular trading hours which is so much better than being stuck in a bad position in the SPX. Also there is no SET issues. I don't spread so much in ES options because you can roll very easily so as long as your trading small you won't get into too much trouble.
 
Quote from RichardRimes:

If you are comfortable trading SPX options then I think you will much prefer ES options. Trading the options are very different than trading the cash ES. More for swing trading. Very liquid and you can get in or out after regular trading hours which is so much better than being stuck in a bad position in the SPX. Also there is no SET issues. I don't spread so much in ES options because you can roll very easily so as long as your trading small you won't get into too much trouble.
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Thanks. I agree about the timeframe which is part of what I'm going for (avoiding some of the noise in ES.)

As for overnight: I've noticed the spreads widen out quite a bit with pretty low volume. Do you hedge in ES until the cash open or can you get fills overnight inside the spread?
 
Quote from joneog:

Thanks. I agree about the timeframe which is part of what I'm going for (avoiding some of the noise in ES.)

As for overnight: I've noticed the spreads widen out quite a bit with pretty low volume. Do you hedge in ES until the cash open or can you get fills overnight inside the spread?
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yes, you can get filled, but don't expect to be filled in middle of bid and ask......my suggestion, if you don't like the position you are in overnite and can't sleep.....just eat it and get out....there will always be another trade.
 
Anyone buying ES options overnight, do the options respond to the overnight trade ? Last night could have made a killing buying at 1290-1300..
 
volume at nite is obviously much lower and you can't always get filled at the price you want but I'm finding this year it is easier to get fills over nite than even last year. You might change the numbers...if 95 isn't getting a bite then try 1300. However I wouldn't recommend trading the ES options intra day ....there is just no real point....if your scalping then just do the cash ES. I usually hold the calls/puts 2-3 weeks and sometimes thru expiration. Only if I'm really lucky and we have several days of either delta or vol movement in my direction then I'll close early. ES options are really not the best for day trading.
 
Quote from RichardRimes:

Very liquid and you can get in or out after regular trading hours which is so much better than being stuck in a bad position in the SPX.
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I'm finding that this is true for ATM or ITM options but it still can get tricky getting out of your position the further OTM you go after rth (zero bid :( )
 
Quote from joneog:

I've traded ES for many years and have recently considered ES options to compliment and partially supplement what I'm doing. If you've traded both, or the options, I'd appreciate your thoughts / criticisms on the following:

The way ES trades (alot of chop, retests, fake-outs, backfill etc.) I find myself more-and-more not maximizing winners like I should, getting caught up in the noise. It's not a question of trading too big IMO since I use a relatively conservative margin. (Long) options may fit my more binary, risk-adverse, big R/R approach a bit better.

So, I was wondering if the trade-off between the theta, lower liquidity, and vega risk to the downside (long vol obviously, if vol is high I'll prob go with verticals or stick with ES) is worth the gamma; vega on the upside; ability to customize risk/return profile; ability to use a soft stop; and with pre-defined max-risk eliminating catastrophe risk to account from terrorist attack, suprise fed move, sovereign default (a type of loss insurance against 50-100 handle black swans) etc.

Most of these trades would be intraday-swing trades, some may last 2-3 days. No hard-stop but will have certain time/loss exit provisions so as to limit the decay. Comm. will be similar.

I realize this is a somwehat subjective thing, but I was curious if others have weighed the pro's and con's and what they found.
More...

stick with SPY or SPX options. Just watch out for those ex div fridays on SPY.:D
 
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