I am new to the forums and impressed by the amount of data on here. I am not new to options trading. I have been trading options on equities for 8 years now. However, I recently discovered S&P e-mini options on futures. I was researching high probably income scenarios with SPX when I came across options on futures. I could not find a thread on this in the forum related to this. If anyone can point me to the right thread I would appreciate it. 1.) I would like to study the risks of high probably 1.5 to 2 standard deviation vertical spread trading? 2.) What are the risks of trading a derivative on a derivative? 3.) Notational value differences between SPX, ES, and ES options? 3.) Any websites or links out there would be helpful. Thanks.
keyword in your post is "income" sounds like something from a seminar or one minute millionare options trading jargon.... multiplier is 50 on ES where other products are 100... ES trades in quarters.. Ie .25 .50 .75 .. you will not get fills inbetween those values.. they are not valid.. read a little more about convexity effects.. what happens to the distance to your strikes in deviations when you sell 20 delta puts then volatility doubles... its a convex function.. meaning you get exponentially closer to your strikes with ever point in volatility increase.. ... the farther you go out into the wings the more pronounced the convexity effects.. but all things being equal i'd sell otm index juice rather then single name.. just my thoughts..
Small correction on CD's answer. The ES Options do trade in nickel increments. I'm a huge fan of the ES options for the smaller retail trader. They are highly liquid and even FOTM options WILL trade although you may have to accept some excess slippage. Most traders will do variations of flys or backspreads to keep comfortable with the Greek. Play with them on sim to get comfortable.
+1 maybe we can get a thread started without putting people down and arguing! there is slippage for sure on ES OTM options for sure...
The SPX options are European style (no early exercise) and cash-settled. They're technically securities, but are taxed like futures. I seem to recall the SPX options are still pit-traded, whereas ES options are traded on Globex only.
I wasn't going after anyone.... I just don't like the word "income" to describe strategies..... My orders don't go through for .40 increment for example... I tried yesterday
ES option spreads trade in quarters. Single options trade in nickel increments. They are very liquid and I trade them a lot.
ES futures and ES options have the same notional value, same risk and margin requirement. Futures options margin are determined by SPAN rules and margin requirements change continuously with changes in the price of the underlying. Some people find that disconcerting. ES futures trade about 23/5, whereas SPX trades during pit hours. ES options now have weekly expiries.