difference between index options and future options

Discussion in 'Options' started by yip1997, May 26, 2006.

  1. I have been trading stock options for a while and I want to consider trading index options or future options.

    What are the differences and benefits between trading index options and future options? Can we apply the same trading strategy to both index options and future options?

    Thanks in advance.
  2. rosy


    for the most part they are the same. however, if you do size then you would want to know the settlement of the option. future type vs stock type. this would affect how you exercise the option and the prices for rolls and boxes. I know some firms who essentially pool there index trading into one portfolio and hedge with whatever index is a good price.
  3. What is the margin requirement for future option? Which one is lower? Is 1 contract of index option equivalent to 1 contract of future option in terms of p&l?

    According to IB, commission cost of one index option contract is 0.75 whereas that of future option is 1.65. Does it mean that index option offers a lower cost?
  4. candymr2


    Cash-settled index options(ie. spx) might have lower commisssions, however SPAN allows for greater leverage. So you are still getting a better deal trading options on futures - in my opinion.

  5. Interesting. But then why do traders continue trading index option? Are there any advantages of trading index options?
  6. Are there any free softwares or websites that compute the span margin for you?
  7. omcate


    Option exchanges such as CBOE, ISE, PSE etc., have imposed cancellation fees for option orders. As of today, CME does not charge anything for canceling or modifying orders related to options on futures.
  8. i cancel all the time (spx options) and haven't been charged a fee...is my broker eating it?
  9. I don't believe in and IRA your can trade options on futures...I trade in our IRA spx option spreads
  10. I think so. Brokers like IB charge you the cancellation fee whereas ameritrade doesn't.
    #10     May 27, 2006