ES weekly option

I always thought future option is not tradable, because of the light volume and large spread.

yesterday, I suddenly found ES/NQ weekly options has decent volume.
plus, there are weekly options! just like SPY/QQQ options.

that light me up. why? because stocks/etfs options need strict book keeping, IRS treat me as I trade those underlyings. wash sale rules and PDT rules apply to stock/etf option trading. the wash sale rule really sucks, if I frequently trade SPY/QQQ, easily create a chain of wash sale, if there is no exact trade recording, it is headache when reporting tax.

while future option is just like future, almost 24hrs open, and in tax, it is treated as 2156, do not need book keep each trades, just that month or that quarter. very simple.

plus more leverage than future, another thing is I do not need stop loss, either win or lose. if i just long call/put, the lervbearge is far better than ES/NQ itself. while I do not need worry about unmanagable events, teh worst is the call/put goes to zero.

anyone trade ES future option? would you like to share some experience

 

The biggest difference between options on S & P futures and cash based indexes is settlement. When the SPX expire, your position is gone. When the ES options expire, you might have a futures position. If some one is pure trading and wants no position at expiration, stick with SPX. If your using the options to hedge something and you still need the hedge, ES options are better.

1245

 

Generally the SPY is the best trade because it is tight bid/ask and has huge vol. The SPX and ES options have much less vol and wider bid ask spreads.

ES options are useful for overnight trading.

SPX options are useful for expiry day trading because they settle in cash. But the lack of liquidity keeps me away. so far..

 

There is a tax advantage to trade SPX vs spy.

 

I first tried ES weekly options a few years ago and was disappointed...had some bad experiences with them but today they have become my bread and butter trade.

I have no trouble closing a FOTM option even when no bid is available as long as I'm willing to sit on it over night. As mentioned, generally it converts into the cash so you can then trade against the cash ES you know you'll get or close it Sun nite.

There are downsides...margin changes a LOT especially in a fast moving down stretch so if you are trading these you should have a substantial cushion until you know what your doing. The beauty is with the options most brokers will adjust your margin if you spread your risk....so if you are primarily a seller and get caught you can buy a lower/higher strike and have a defined margin/risk trade.

Basically I think ES and ES options are much better for the retail trader than the SPX options ever were. Very rarely will I trade the SPX weekly...they are a bitch. While spy is more liquid they are basically more expensive to trade (Brokers fees)

 

I don't see what the big deal is with option exercise. Exercises are automatic, and most of the time you will know whether an option will expire in or out of the money. The exceptions are when an option expires near a strike (i.e. is pinned). In those cases, the options are usually liquid enough that you can trade out of the position.

 

Perhaps not a big deal...however I NEVER know if my NTM weekly option will expire in or out of the money. I have also seen some ugly things happen such as a gap down (or up) on Sunday night which may put you where you don't want to be. Unless I have a straddle which I'm willing to hold thru expiration I like to roll out or close my weekly, then I KNOW exactly what my P/L looks like.

 

It's a big deal if it's a hedge. What if you have picked a portfolio of $1M of stocks but want to hedge with selling index options. If you use the SPX, your hedge is gone. If you use ES options, you're still hedged Monday morning and can replace the futures hedge with options if you wish.

 

For that matter, the SPX settling on the open could be an issue in that you are unhedged for a short period of time.

 

Yes, those ES/SPX quarterly expiries are to be avoided with am settlement on the friday. For that matter the SPY is to be avoided on qtry expiry fridays as it goes ex dividend on the friday. So basically be out of weekly options by thursday night.