Can I trade KOSPI options, as if it were futures?

Discussion in 'Index Futures' started by Trader_Herry, Aug 14, 2006.

  1. I see KOSPI is so liquid!
    I have no idea how to trade options, but would it be possible to treat it like it were futures and daytrade?
    I just know how to trade futures. I get no idea about options and all its greeks. :p
    Should I give their options a try, or should I stick with its futures?
  2. ozzy


    Yes you can. They are pretty wild.

    Those kim-chi eating bastards have one hell of a liquid market.
  3. KOSPI option is going to be better than futures since:
    1) the risk is limited for option buyers
    2) the margin is much lower than futures

    If I can apply my own futures strategies to options, it is going to be fantastic. :)

    Is KOSPI the world largest option market?

    Apart from KOSPI, what other markets can come (roughly) up to KOSPI options?
  4. MTE


    Looks like nothing comes even close to KOSPI options - KOSPI options.

    I don't know how wide the bid-ask spreads in KOSPI options are, but usually wide bid-ask spreads are the main problem with daytrading options. Also, generally, in order to be able to trade options as a substitute for futures you need to know how options other words, if you are going to trade options then sooner or later you will have to learn the basics as eventually you will find yourself in a situation where you don't know what went wrong with your trade or why.

    Just my two cents.
    Good trading.:cool:
  5. Wow! Amazing. It is <font color=red>283,772</font>!!!!!
    The next runner is just 6,179.

    Yes, you are right. We can't just predict the direction as it's what we need to do with futures. The spread is usually large which make daytrading options not worthwhile.

    However KOSPI may be a special case. It is heard the spread can be down to 1 tick. Very impressive! I'm just not sure whether it is 1 tick wide for most of the time.

    If so, I wonder if we can trade it like futures.
  6. MTE


    Just to add to my previous post.

    Yes, you can trade them like futures provided you have some basic understanding how options move and what affects them.

    For example, although futures have basis risk, time decay in options is a lot more pronounced. Also, volatility has a significant impact on option prices. So, unless you trade deep ITM options you have to consider those factors, but then again, you need to understand the basics in order to know what an ITM option is and why volatility and time decay are not as important for ITM options. I think you get my point.
  7. Thanks for your reminder.

    I will definitely trade deep ITM options since the delta is as near as 1 (relative to OTM ones). This should eliminate all other factors ("greek" things).

    Does time decay matter in daytrading?
  8. Qs:
    Do you prefer trading KOSPI futures or options?
    How do you compare between futures and options?
  9. MTE


    ITM's are usually less liquid, which makes the bid-ask spread wider. That may be the main obstacle to daytrading KOSPI options.

    Time decay should not be an issue, but it can be. For example, on Fridays, sometimes even earlier, premiums tend to shrink towards the end of the trading session as market makers move the clocks on the pricing models forward due to the weekend decay, this is especially pronounced heading into long weekends. So, I would think this may present a problem with daytrading ATM/OTM options.

    In any case, I don't daytrade options, well at least not intentionally, and I have no experience with either options or futures on KOSPI.
  10. When I looked at them the liquidity and low spread was all well out of the money. Part of the reason its only a 1 pt spread though is that those are cheap options at that point (at least as a futures trader that was my perception).
    #10     Aug 14, 2006