SP500-index options

Hi All,

I have been told if you trade 100 lots or more using combinations (verticals, diagonals, etc) you get a spread of around .10 when trading SP500-index options. Currently I’m not that big and trade the DJ EuroStoxx50-index (the SP500 of Europe) with about 30 till 50 lots per leg. In some occasions I scale out with increments of 10 lots per leg. Does any of you have experience trading SP500-index options with comparable size and what kind of execution can I expect?

Thanks,
FT79

 

the sprds are a lot tighter in the spy options

 

True but for every 1 SPX I have to trade 10 SPY's and SPX is European Style & Cash settlement

 

Euro vs American should be no big deal since there is virtually no reason to exercise a SPY option early.

You wont get 10 cent wide markets even on spreads in the SPX and even if you had a floor broker you called right down to the CBOE with. There is NO incentive for there to be 10 cent wide markets in a single listed product.

 

I don't personally trade SPX options, but from what I recall CBOE has a monopoly on SPX and OEX options, so there is typically a large spread that is sometimes non-negotiable. My advice is to take a look at the ES.

 

The bigger issue with the single listed products like the SPX is that there is NO true electronic access. WHen you send an electronic order to the CBOE in the SPX it goes to a broker box and then that broker puts it on the SPX market but its not seamless like the other electronic markets.

 

Having traded single orders and multi leg spreads with thousands of contracts in the SPX I can tell you that the nicest way to put it is the market makers are crooks. No one gets "good" spreads in the SPX, the best you can do is get taken for as little as possible. You can do better in the NDX because there is competition.

 

We trade thousands of SPX contracts a month too. We allow our FB's to work and show our orders to off floor liquidity guys. Thats the only way to keep the MM's somewhat honest. The SPX is clearly an institutional product and as someone already mentioned the SPY would be a better choice for the retail guy.

 

I've placed orders of up to 400 on SPX. I prefer SPX over ES/SPY due to size which means effectively lower commission. The b/a spread is about the same when you adjust for the size.

 

Ok, thanks of all your posts. What I don't understand is the high volume in the SPX options with the circumstances you all mentioned. I want to move to the SPX because of many strikes available vs. DJ EuroStoxx50 (every 50 pionts a strike and trading around 3800 pionts, multiplier of 10). It's the benchmark in world, if they listed it on multiple exchanges the volume would at least double and I think triple becaues of the smaller spreads. any idea why this is not the case, RUT, NDX are traded on multiple exhanges.

Thanks,
FT79