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Cdntrader

Registered: Mar 2001
Posts: 3427

07-11-12 08:02 PM

SPXW Options..Why Don't MM's just tighten the spread already?

SPY weekly options usually runs 1 to 2 cents spread vs 20 to 40 cents on the SPXW options. If they went to 10 to 20 cents on SPXW there would be parity.

Wouldn't the volume just flood over to SPXW if the spreads were equal?

What's the hang up??

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RichardRimes

Registered: Oct 2005
Posts: 2528

07-11-12 09:06 PM

I agree...I tried a spread but sat on it all day, it didn't get filled. I certainly think it is a much better idea than the voodoo "print" on the SPX...but if people are getting ripped it won't do the volume.

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trefoil

Registered: Mar 2007
Posts: 3385

07-12-12 01:48 AM

Those spreads have never been equal. Don't know why, don't care. You get an order of magnitude more bang for the buck on the SPX, so worrying about a doubling, proportionately, in the spreads is just being cheap.
Or, you get what you pay for. As always.

*PS: ES options, for whatever reason, seem to allow for getting filled very favorably at weird, random times and places. I haven't tried to systematize that, but maybe, if you're really worried about those spreads, you might try that. Worth a shot. And they trade 23 out of 24 hours of the day. That can be quite an advantage sometimes.

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FSU

Registered: Jun 2010
Posts: 239

07-12-12 02:39 AM

Seems to me they are extremely tight, much better then the actual SPX options which are generally quoted between 1 and 4 dollars wide. As you say the spxw's are generally .20 to .40 wide which equates to 2 and 4 cents in the spy's. Not an extreme difference, especially when they trade easily between the markets.

Remember the SPY's are multiply listed, so there are many many market makers quoting into them while the SPXW's are single listed at the CBOE so there are many fewer market makers sending quotes in.

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FSU

Registered: Jun 2010
Posts: 239

07-12-12 02:44 AM

Quote from RichardRimes:

I agree...I tried a spread but sat on it all day, it didn't get filled. I certainly think it is a much better idea than the voodoo "print" on the SPX...but if people are getting ripped it won't do the volume.

I think the OP was referring to the width of the quotes, not actually trading a spread, but I have found that spreads are traded very easily in the SPXW's. I watch the COB (complex order book listing spreads) all day in this product and I can tell you that you have to give up very little edge to get a spread filled.

On a side note, the SPXPM's spreads seem to require even less of an edge to be filled.

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hft_boy

Registered: Apr 2012
Posts: 177

07-12-12 06:46 AM

Quote from Cdntrader:

What's the hang up??

I don't actually know the reason but I'd hazard a guess that either a) SPXW options are somehow harder to hedge since they trade against a basket of stocks instead of just one, or (more likely) b) market making fees for SPXW options are higher.

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