You forgot XSP. It's a mini-SPX index (1/10th) similar to SPY, but while SPY options are like equity options, XSP options are index options. I'm no tax expert, but aren't index options treated like futures as well? The main advantage of options on futures (either ES or the big contract) is the SPAN margining which aids naked premium sellers. The advantage of index/ETF options is their liquidity. I don't trade options on futures, but as far as I'm aware, index options still beat them when it comes to liquidity. SPY options are physically-settled each expiration, index options are cash-settled and options on futures can be either, depending on whether they are the serial month or not. Index options have weeklys.
Thanks MTE. I'm not a tax expert either, but I believe that the index options have the favorable tax treatment also. However, I don't think the options on ETF's qualify for futures type tax treatment. Also, I don't think that you have to sell premium naked to benefit from span margining. But this advange may go away soon. If I understand correctly, stock (and probably indices?) will soon have span margining too.
The greatest benefit of SPAN over reg T is realized on naked shorts. Yeah, you're right, ETFs may not qualify for futs tax treatment. Indeed, there's talk of introducing SPAN-type margining to stock/index options, which will reduce that advantage of options on futures.
Is it a good enough reason to buy straddle if you think the stock will make a bigger move than the total premium you pay, say you pay $4 for the straddle and you expect the stock move more than 5 pts?
No because if you buy it and the vol's are high...even if your right in direction if vol's go down you lose. Murray (sailingbeme) and his group did pretty well buying straddle's before earnings but they had very strict criteria before putting them on. He has since moved on to mostly diagonals (I think)
The people that run www.optionetics.com are into long straddles/strangles, that's one of their favorite strategies. I think they buy 3 months to expiration on stocks that have made a big move recently, they then sell with one month to go. I don't know how successful they are though.
A529612-------Risking "4" to make "1" is a horrible trade-off with a long straddle position. You have to have more of a "home run" mentality than a "small ball" mentality when buying premium.
Does anyone know if there is any "official" time for options to begin trading each day? I know I have been in options positions and had to sit the first 15 minutes of trading watching a big move in the underlying from the open until there was a B/A for the option?!? Thanks
IMO there's nothing wrong with selling 'cheap gamma' OTMs, just be sure to go even further out and buy even more wings at that.