What are the advantages/disadvantages for trading options on ES (futures) and SPX (index). Your comments and views much appreciated. Thanks
You can't trade the SPX, it's a cash index. You can however trade derivatives based on the SPX, like ES, SPY, SSO, etc.
Before they invented globex we use to trade OEX. Those were the most liquid actively traded options on the CBOE. They were options on the S&P 100 index. Do they still exist? Does anybody trade them anymore?
Main point to consider here is the fact that fills on SPX are still terrible when traded electronically. Someone will correct me, but technically the quotes you see for SPX options aren't necessarily firm so if you send a market order it might not be filled. On spreads i have waited up to 3 minutes before for confirmation. SPXpm options should be better in this regard, but i think ES is tighter. Also it depends on your objectives. For example if are you trying to trade the vol then hedging SPX will involve another exchange's future, and you might not get cross margining benefits. ES is probably the more flexible one. From a pricing point of view they are obviously different as well.
My one concern about ES futures option is if you get assigned you you get a futures contract. I am not sure this is the case only at the end of the quarter and other two months it is cash settled. Some clarification much appreciated. I have looked into CME site but could not find anything and IB only states Physical Delivery.
It is theoretically possible to be assigned, but in reality it will never happen because there is little incentive/cost saving for the couterparty to exercise it. Its a futures option, but iirc in the states futures options are still subject to stock type settlement, cme tried to change that recently. Otherwise, with futures-style margin there's no reason for early exercise, American is basically European.
if you are trying to trade electronically, the best option is probably the es. they are very liquid. the vol levels are goiing to be almost exactly the same. the only difference being you can early exercise the es options...which settle into es. if you don't have a futures account why i just said would apply to spy.