Futures Vertical Premium Examples

Discussion in 'Options' started by Lucias, May 21, 2011.

  1. Lucias


    I primarily trade direction and have mostly trade futures sim. I trade @ NADEX with my real money. I'm skilled in trading futures and using stops. But, I like having a price floor or ceiling like in vertical spreads and getting away from stops. I can trade for as little as $10 per point on the ES at NADEX.

    I can enter the trades just like I would with futures. There are several default ranges and the premium is automatically factored into the underlying. I.e when price is near the floor, the contract trades for more money. I like that the contracts at NADEX are easy to trade -- i.e like futures.

    I wanted to know if anyone trades vertical spreads daily like the futures and if there are any platforms for making it easy. What type of premium do you have to pay?

    Let's say I want to place a 2 day trade on the ES but want to use a vertical spread instead. I want a max of 20 points of risk. What type of premium will I pay? What is the minimum tick size? I have a lot of questions obviously about this.

    I've thought about too, if I'm taking out a measured move, maybe setting up a spread with say 25 points risk and 20 points upside. The idea is to capture or have a slight bit of premium edge, in addition to my directional edge.

    Any discussion on trading options for the futures contracts.. is very appreciated. I'm primarily interested in the S&P 500 and crude.
  2. the trading product you describe (ranges, floors, ceilings) can be constructed using futures and option combinations.

    say ES is 1320, you buy a future, buy a 1300 put and sell a 1350 call
    this is equivalent to buying nadex contract with 1300 floor, 1350 ceiling.

    Nadex contracts are limited in time, but exchange products have much greater time span. but this brings bigger premiums.

    when playing with exchange traded instruments , you can also make trades based on volatility and theta decay.

    regular ES is 50 usd/point however there is a SPY contract which corresponds to ES but with 10 usd /point. This SPY (an ETF) has also very liquid options. For crude, you can check USO etf. it also has options but much more coarser strikes than regular crude contract if i remember correct.
    to trade these options, thinkorswim platform can be used or any other option trading platform.
    To sum up, this Nadex (a branch of IG) is effectively a bucket shop wrapped as an exchange.
  3. MTE


    Another way of doing the same thing is simply buying a 1300 call and selling a 1350 call, or alternatively selling a 1350 put and buying a 1300 put.