I am thinking of switching from swing trading OEX options to using SP emini futures options : does anyone have a clear understanding of the relative merits of OEX versus emini options, eg. liquidity (good with OEX) & spread size (not so good with OEX) ? J-Trade (Btw, I also trade emini futures intraday, but prefer options for holding overnight.)
Thanks, Pabst - I'd be grateful for the link to the source of that information, so I can compare OEX with full SP options.
J-Trade, are you profitable trading OEX options? If so I would recommend that you do not switch. OEX is by far much, much more liquid than S&P emini options, especially if you are looking spread strategies. If you are not profitable trading OEX options, then switching to emini will only make it worse as the spreads are wider and slippage greater. I used to trade options when I was a long- and intermediate-term trader. But for swing strategies the 5-10% premium that you have to pay for bid/ask is just too much to overcome. Also, if you are successful with swing-trading options, why not trade emini futures instead? The leverage is more than you can get with trading OEX options and the risk about the same.
J-Trade, volume data courtesy of both cme.com and cboe.com Listen to dottom. Day trading options was semi attractive prior to reduced day trade margins in mini futures. When e-mini margins were high at 5k it was much easier to have a home run day (20%, lets say) hitting an option then trading futures. Even now, a week to expiration it's hard to beat the bang for your buck that options give you. But when you consider that a day margined e-mini at 2k returns 25% on a 10 pt. move(not as if that's easy!) your better return on risk, and I consider slippage an important part of the risk equation, is in futures. Not to mention the commish. $2.40 to trade the equiv. of 500 SPY. $1.95 to trade at the money or out of the money will % you right out of the game.
Thanks. It looks to me like the full SP futures options are similar in volume to the OEX, & presumably 2.5 times larger in value. Pabst - did you mean 'open interest', rather than 'volume', on 2 Jan (if not, my opening comment re OEX / SP being similar may be wrong) ? I am indeed trading emini futures intraday (via IB), but I use OEX for swing-trades than can last a few days. Here, although the OEX spread is a lot larger than the emini, I like the 'absolute protection factor' of an option rather than a future, even though it costs a premium (which of course is much less in the last part of the cycle). My ulterior motive in switching from OEX to SP futures options (& I will now only consider the full-size) is that I am interested in changing my options brokerage to one where, after entering a position, I can automate a stop loss, profit target or indicator exit. As I am already using TS6 (as a subscriber to Ed Moore's Option Magic OEX methodology, I am able to get TS6 @ $99/month) & I see that you can now open a futures & futures options account with TS Securities for $10k, I am gathering info about this. I'm not in a hurry to make this change - hurrying with trading always seems to cost me money - and I see that TS Securities do not yet handle online equities options / OEX trading (although they will 'soon'). So I have emailed TS this weekend with a number of questions as I evaluate the situation. If I eventually find a way to automate my exits in way with which I feel comfortable, I will let the board know (& I am aware that there are a number of possibilities available).
In regards to Ed Moore, you may want to read this: http://www.cftc.gov/enf/00orders/enfrhythmofthemarkets.htm
J-Trade: Sorry I gave you OEX OI from 1/2/02. Volume was 28k on that date. While e-mini options have virtually no volume(DEC. 2001=1188 contracts) the larger "open out-cry" version(SPX x 250) had a DEC 2001 vol. of 295,000. If you're gonna stay with a trade for a few days the big contract gives you all the liquidity you'll need.