Writing Options on ES and SP (S&P Futures) instead of SPX

Quote from Pabst:

ES options are available to a surprisingly few number of traders. The front end order entry
systems used by most options traders DO NOT facilitate options on futures. That's one reason
YM and ES options lag dramatically in volume.
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CME Announces Certified Options Partner Program

Twelve Firms to Provide Front-End Solutions for Options Trading

CHICAGO, May 19, 2005 — As part of its initiative for increasing the volume of electronic trading for options on foreign exchange, equity indexes and interest rates, CME, the largest futures exchange in the U.S., today announced the new CME-Certified Options Partner Program listed below. This program fosters collaboration between CME and the CME Options Program Partners so that enhanced CME Options products and functionality are available to the marketplace upon CME launch.

(...)

See also www.cme.com/optionspartners
 
Quote from andysmith:

if an awful event occured at say midnight and I wanted to put an ES hedge on before the market opened the next moning, wouldn't ES have dived by the time I put the trade on at say 1am?
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Maybe...maybe not. If you don't use ES or SP via Globex, what else could you hedge with at that hour?

Also if you have exposure in the direction you are taking the ES/SP position, your margin would likely be lowered under SPAN by the transaction.
 
To echo Pabst's comments -- the ES option market is BD-driven! It's better than it's been in the past, but quite often there is no posted market in itm/otm option on the ES. There is no DPM-system on the futures exchanges.

Trade SPX when haircut is a debit-req. If you need SPAN, use the YM or ES. Trade SP options if you trade size and need SPAN treatment. With a good pit broker you can trade very near FairVal when moving SP options. SP options have many advantages; SPAN, size and an active, local-market.
 
ktm,

I've read pretty much all your posts on ET (hundreds) related to writing options/spreads to collect premium.

Can you suggest a strategy that uses ES options to hedge SPX short gamma positions (typically deep OTM SPX iron condors)?

Much appreciated,
Andy.
 
I couldn't find it anywhere on CME website for future option margin calculation. can any one give me the formula.
If I want to a sell 600 dec ER2 call option what is my margin gonna be ?
thanks. the margin on cash index is so high.
 
Quote from polee2000:

I couldn't find it anywhere on CME website for future option margin calculation. can any one give me the formula.
If I want to a sell 600 dec ER2 call option what is my margin gonna be ?
thanks. the margin on cash index is so high.
More...
 
Quote from polee2000:

another question. is future option marked to market like futures it self ?
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Yes. It's an option on the futures contract not on the index.
 
Quote from andysmith:

ktm,

I've read pretty much all your posts on ET (hundreds) related to writing options/spreads to collect premium.

Can you suggest a strategy that uses ES options to hedge SPX short gamma positions (typically deep OTM SPX iron condors)?

Much appreciated,
Andy.
More...

I like debit spreads between the current price and the area where the condor would start getting into trouble. If your put wing was say SPX 1150/1140, I might take a smaller number of ES 1180/1170 debit spreads. Sept 1180/1170 closed at fair value $1 yesterday and Oct was $1.50. That will turn into $10 of protection to offset SPX at lower levels. I tend to be more aggressive when I am favoring a down market by placing the debit spread closer to the money and paying a bit more. The result is wider window to collect both sides of the condor PLUS the partial or even full $10 from the debit spread. Putting on Oct could also serve as protection for both Sept and Oct condors.

The call side has a steeper curve and it's more expensive to run the same strategy to the upside.
 
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