ES vs SPX vs SPY options

Discussion in 'Index Futures' started by lpope, Dec 11, 2020.

  1. lpope

    lpope

    I have a short ES position to partially hedge my portfolio downside risk. My issue with it is twofold: 1) I think I'd actually rather be selling index calls that are less than a year out but greater than a month to collect some income; 2) I'd rather not be borrowing on margin in my securities account to fund the commodities account as that's added cost at Interactive Brokers.

    This is a newb question but any advice on the best way to meet my objectives? I think I'd prefer section 1256 contract so ES/SPX but I could go either way. My size is large enough to do SPX.

    Thanks for any help and sorry for not searching ... but three letter symbols don't work in the search box.
     
    legend4life likes this.
  2. Sig

    Sig

    SPX and ES options are going to give you the same results, the only differences are second order like what you mentioned and cash settle for SPX if you plan to hold to settle. I also think SPX is considered in PM but I know ES isn't since they are futures. I almost exclusively work with SPX but only because of the cash settle which matters to my trading but doesn't matter for most. One minor issue with SPX is if you're trying to do more than 10 contracts at once for COB limit orders many brokers send your order to the floor rather than the electronic exchange. I've never had one of those floor orders execute, even when one is pending and I put in a small order at the same price that executes immediately. So if you have a larger spread order you don't want to break into 9 contract chunks ES is better.
     
    zenlot likes this.
  3. You may be charged margin interest rate since ES has assignment risk and therefore, the brokerage need to loan you way more than SPX.
     
  4. May I ask who is your brokerage? I didn't have such an issue with TDA when I send an order to sell 11 naked puts.
     
  5. Sig

    Sig

    I actually only had that problem with COB orders like a 10 contact spread. TDA was one of the places I encountered it, as well as IB as well as OptionsXpress now Schwab.
     
  6. You

    You

    While doing my own research to understand what "COB" orders were, I found the following at the CBOE. https://markets.cboe.com/us/options/trading/complex_orders/

    ("AIM" is Cboe's Automated Improvement Mechanism)
    "Note, during regular trading hours (RTH), the maximum order size for AIM eligibility in SPX/SPXW is 10 contracts, which applies to the smallest leg of the order. This size restriction does not apply to any other class, nor does it apply to SPX/SPXW FLEX orders or to SPX/SPXW orders during the global trading hours (GTH) session."

    "Complex orders combining stock and options legs may be executed in open outcry or electronically. "

    If I'm reading this correctly, it's because @Sig was trading a spread, vs yourself, a naked position.