Insurance for index futures daytrading?

Discussion in 'Trading' started by mag, Mar 27, 2008.

  1. mag


    I recently read that some successful futures trader (I can't remember if it was commodities or index) has an open call option for every contract he buys and an open put option for every contract he shorts while daytrading.

    He does this because of "limit up" days.

    Does the SP mini have "limit up" days?

    Regardless of the previous question, is option insurance important for index futures daytrading when you already use stops?
  2. nlimit1


    No need for option insurance... Just use stops and you will be fine.... Limit days happen in grains and other markets but not really in the indexes
  3. Wouldn't he need a put for every contract long and a call for every contract short (the opposite of what you said). The bid/ask spreads would kill you and the commissions wouldn't work well either.

    This is also ignoring the fact that the strategy you mentioned is a synthetic long call or long put.
  4. mag


    Your right thegazelle, thats what I meant.

    Thanks nlimit1.
  5. asap


    one long fut + one long put = one long call
  6. Unless of course a 20 SD, black swan event occurs and you're on the wrong side and highly leveraged. Then you gotta hope those personal guarantees don't hold up in court or you're selling your house and moving back with your parents. :D :D

    I would obviously be more concerned with a downside move than an upside, so buying OTM puts could be a decent way to hedge your long exposure. Or try trading negatively corralated instruments to establish a natural hedge.