S&P Pit Traded Futures and Options Questions

Discussion in 'Trading' started by One, Sep 21, 2004.

  1. One

    One

    A couple of questions for members that are familiar with the pit trades S&P contracts:


    Futures Contracts:

    1. what size is typically on the bid and offer in the full size contract?

    2. how do you typically enter orders for the full size futures contract and how long does it take to enter an order and receive a confirm? Are you calling the floor brokers direct?


    Options Contracts:

    3. how wide is the bid/offer spread for front-months, near-the-money strikes for puts and calls?

    4. what size is typically on the bid and offer for front month, near the money strikes?

    5. same as #3 but for spread orders, say for a near the money straddle?

    6. same as #4 but for spread orders?

    7. how do you typically enter orders for options on the full size contract? (for example do you first ask for an indication of the market and then enter the order? do you place the order over the phone? etc...)

    Thanks. I appreciate any responses or additional insight regarding the full size contract that you might offer.
     
  2. nitro

    nitro

    3) The B/A spread is large for SPX and OEX, but very tight for DJX. I am not sure about the MNX. You need to put up a quote for the contract you are interested in and see for yourself.

    4) if it's the SPX or the OEX, the MM usually shows 50 x 50 at whatever prices he is making a market in. On the DJX it is often 1000 x 1000. I am not sure about the MNX.

    5) Very difficult to say, since spread orders aren't really quoted. Depending on which strike on which contract, you could probably do a 50 lot by giving some edge. If you need to do large size, many of those are negotiated by a phone call to the floor MM.

    6) Again, you can do size by calling the floor. The farther you go out, the less liquid, and depends on what you want to trade.

    7) When you say the full size contract, I assume you mean the SPX. Depends on your broker. If you use IB, it is very simple to enter calls and puts. But you do not have the capacity to trade spreads as a spread at IB on pit traded contracts thru TWS. If you use TOS, that is where they shine, spread orders, particularly in pit traded cotnracts can be input directly from their platform.

    nitro
     
  3. ktm

    ktm

    IB does not trade the pit contracts for futures options.
     
  4. nitro

    nitro

    Uhm,

    That is true. But you can trade the SPX options, which is just as good.

    nitro
     
  5. RegT for retail sux... SP options carry SPAN haircut.
     
  6. The full S&P "pit-traded" futures contract can vary quite dramatically when it comes to the size of contracts being bid and offered.

    One of the factors has to do with the time of day it is, and other times it has more to do with what kind of premium is trading vs the SPX cash index, which would indicate a certain "activity" level by the stock-index arbitrage desks. Or, it may come down to the time of the month and institutions like index-funds putting money to work, or simply certain price levels ( technical break-outs, break-downs, etc. ) which attract more or less activity.

    In any event, there are times that there are only 20-30 contracts reflected at a given bid or offer ( ie. lunchtime ), and there are times when that number can go into 4 digits. It just depends on who is doing what.

    Remember: Size attracts size.

    And there are plenty of S&P futures options and SPX options traders that are willing to step-up and "lay" stuff off if they see that it is beneficial for them to do so.
     
  7. ktm

    ktm

    Yes. I cannot fathom the attraction to the equity index options, when the futs options are nearly identical in every way except the far better margin treatment.

    I just wonder if people realize the difference. And it would give me a lot more people to trade with and tighten the spreads.
     
  8. nitro

    nitro

    1) Leverage is 5x on SP Futs cars as opposed to 2.5x on the SPX. That makes it tough on retail traders. Retail traders like e-mini style leverage/margins.

    2) Commissions are higher on the FUTs options, almost certainly as a result that it is 100% outcry and the leverage is higher.

    3) SP futs opts are a 100% open outcry system. No hybrid open outcry/electronic system like the CBOE's SPX. The CME contracts are kept seperate. The ES options are dead.

    4) They both get the 60/40 tax treatment.

    5) The OEX/SPX is very active with lots of opportunity for profit.

    These five things taken together IMO waaaaay overwhelm any SPAN or other advantage the SP Futs options have over the SPX _for_the_retail_trader_.

    nitro
     
  9. ES options are at least 150up at the same spreads as the SPX. If long gamma there is no reason to favor ES; if short gamma, ES is superior due to SPAN.
     
  10. nitro

    nitro

    That is true, but my problem with the ES option contracts are two fold (in addition to anything I mentioned alrady in the above post):

    1) No retail activity in the ES opt contracts by comparison to the SPX.

    2) Long gamma or short gamma etc are meaningless if someone is not willing to give you your price. If a MM hits you, I guarantee you are down from the get go a large percentage of the time.

    Retail traders need retail traders on the other side of their trades. If you want to go mano a mano and bang your head against MMs, be my guest.

    nitro
     
    #10     Sep 22, 2004