I want to long put to bet on the decline of the Nasdaq Index. I'm wondering which is better, the NDX options or the NQ options. The former has a contract multiplier of 100, while the latter has a multiplier of 20. The trading volume and bid-ask spread for both are similar. The commission from IB that I use is calculated based on the number of contracts. At first glance, the NDX options seem better. Is there anything I haven't considered?
NQ options are options on futures; NDX options are index options. They are two very different products, with a different underlying and a different deliverable. It's not just about the multiplier or the commission.
The exercise style of both is European. The settlement type of NQ options is NQ, while that of NDX options is cash. NQ options are tradable 23 hours a day, while NDX options are tradable from 09:30 to 16:15. NQ options have a premium/discount in their price. For the 10-day-to-expiration put options on NQ and NDX, both have strike prices that are 10% away from the current price of their underlying contracts. For example, if NQ is at 98 and NDX is at 100, the strike price for NQ options would be 88.2 and for NDX options it would be 90. Assuming that NDX drops by 5% at 12:00 tomorrow, what impact would this have on the options for both at that moment? I believe that NQ will experience a similar decline, which would result in a comparable increase in the options for both NQ and NDX. Since I trade NQ futures, I want to turn overnight (Saturday and Sunday) risk into profit (for example, by buying put options that are about 10% out-of-the-money when purchasing NQ futures). If I use SQQQ, it will offset the profits from buying NQ futures.
given an account size and non-leverage scenario, there is not much difference in performance if the math is done correctly. one is cash settled and one is by possible assignment. but underlying nq intraday margin gives traders a lot more leverage, probably 10x more.