I have to choose between /ES Futures Options and SPX Options. I am trying to see where leverage for options is more? In Portfolio Margin for SPX or SPAN margin for /ES Options? I trade with TDAmeritrade.
CME SPAN Margin vs OCC PM margin will not be the determining factor. It will the house risk that your broker allows. You should give their risk team a similar portfolio in ES and SPX and ask them for the house requirement. Remember to use double the size for ES as it is half the contract size. Do you really want to push your margin that far? Are you a naked option seller?
Thanks. Will do. No, I am not a naked options seller. I usually trade multi-leg trades. I was trying to decide between SPX and ES. SPX has the advantage of being an 1256 contract which make taxes cheaper.
Recommend heeding Robert's advice on which has more leverage, but note that TDA's fees for Futures Options greatly exceed those for SPX options. (perhaps not your primary concern, but was about 6X last year for equivalent size. (more like 3X with the new January fee structure)
All futures and options on futures are also 1256. https://greentradertax.com/trader-tax-center/tax-treatment/section-1256-contracts/
"If you have to ask," then your risk control sucks. Get it under control, and then consider PM on SPX positions. You need the straightest, most consistent margining available: • SPAN is a product right out of the bowels of Hell. • PM allows more risk where appropriate, for people who know what they're doing (presumably) For people who are exploring, they can dig the same holes with PM that SPAN would bring. Your solution is the SPX, without PM. SPX carries twice the notional value, at 2/3rds the cost, of ES FOPs == which means that you'll cut your commissions by more than half, by merely trading away the 24hr market. And yeah, 1256 all 'round here....
Span Margin is a moving target that changes with the risk of the market. PM by the OCC is an old system that has had few updates since inception. Instead of updating the OCC TIMS calculation and risk rules, the OCC hints at what it wants clearing brokers to use and require them to have more capital on deposit at the OCC when they have excessive risk as an incentive to get their clients to have less risk. Overall, in my opinion, CME SPAN is a better system. I would say with Lightspeed, PM gives more flexibility unless you want to trade just the futures. CME SPAN Margin is very low on ES and is less 5% of notional. Much better than SPY. For only options on futures or options on cash-settled indexes at the CBOE, I would use a PM account. It also gives you the flexibility to trade equities and equity options. Opening a second small account for directional futures plays would provide you all the opportunities you need.
Actually I have been doing proper risk management for a long time. But, only with PM. I do not have any idea about SPAN. Trying to learn the exact algorithm which SPAN uses. It looks very similar to what PM uses with sticky delta and sticky strike.
gowthamn, this explanation is worth reading. https://www.cmegroup.com/clearing/risk-management/span-overview.html. You can also sign up with the CME for free and get access to CME CORE and CME QuikStrike. https://www.cmegroup.com/clearing/margin-services.html, https://www.cmegroup.com/tools-information/quikstrike.html. Core is very hard to use and QuikStrike is very cool.