There is no reason for you to stick to this abusive system of bid and ask in SPX. It very hard to get out of your positions should things go bad which happens often since SPX is the most manipulated index there is and is constantly pitted against all worldly news out there that you can think of. Try NDX, RUT, IWM, SPY. I like NDX its a great index with good executions and tight bid and asks.
That is true. I have stopped trading SPX condors and credit put spreads since last Summer. Many people have stopped trading SPX mainly due to hard executions and wide bid and ask abusive prices. However we have found a way to break this hold by the greedy market makers but its still not worth it. Search for my post on How to beat SPX market makers, there is a long discussion on it on ET website.
As far as I know you donot trade SPX anymore and moved on to NDX, RUT and other indexes. That is the reason the thread is sluggish and hardly revisted. I have no interest in SPX either.
After some more snooping around on the CME website I did find their brochure that explains the CME EOM Futures options contract on the SPX.. It is European exercise so no early exercise and settlement is different. "Special Settlement Fixing Price"...On expiration day (the last business day of the month) for both the standard and CME E-mini S&P 500 EOM options the exchange uses the weighted average trading price of the nearest quarterly CME E-mini S&P Futures contract during the last 30 seconds of trading before the 3PM close (4Pm east coast). This special fixing price is disseminated immediately using the symbol ESF. This special fixing price provides customers with a timely and accurate way to assess the prevailing value of the underlying contracts. The special 3PM close also gives customers 15 minutes before the close of the CME equity futures markets to offset any futures positions they are assigned if they do not wish to maintain the futures position beyond that day. (Upon exercise, these customers may have positions in the nearest quarterly futures contracts.)" I don't see why Futures Options with this immediate settlement and with expiration at the EOM wouldn't become more popular than the current CBOE antiquated product.
There's a very good reason why those premiums are inflated. I have no problem with selling OTM index puts, but I do advocate defining your risk by buying another further OTM put. Since no one has any idea when the next crash will happen, saying theres a 1^-10000000000000 prob. still doesn't mean it won't happen tomorrow. The biggest question is of course, does the gains from 20 or so odd years offset the one day inevitable loss? Maybe Neiderhoffer can share his opinion?
"The more careful traders sweated a little and came out just fine." I agree. This is a very good thread. I am glad to see some people visit it and raise some questions. I hope the Elite Trader will keep this thread for a long time. If I have time, I'll go back to read from the beginnig. I have tried some options strategies (Covered Call/Naked Put/Straddle/Vertical Spread), but I prefer credit spread as it easier to win. Although I suffered big loss in August, but for whole year, my gains are still much more than loss. I'll continue to use this strategy with good risk control. By the way, I'm interested in learning Future Options. Can some one recommend me: 1. Book 2. Website 3. Where I can open an account for trading Futures options Thanks to Coach, Mark and others for their contributions to this valuable thread. Happy New Year to all of you! Zhang
Unlimited gains in the option market are possible if you are a market-maker. The SEC actually *assists* the exchanges and market-makers in avoiding responsibility for massive violations against public customers. The SEC has more reports like this one. http://www.thememoryhole.org/corp/finance/sec_amex_report.htm This report which was leaked from within the SEC, shows the SEC knows about violations in the options markets. The SEC covers up the violations by keeping these reports a secret for the option exchanges! (The report above only concerns the AMEX. SEC reports on the other option exchanges have been referred to in legal documents but are being closely held by the SEC). How would you like to have the SEC "riding shotgun" with you, as you did whatever you wanted to the public customer? The sky is the limit. But you must be a professional in order to receive the special benefits of the SEC protecting you. The public never wins in Vegas, and they don't win in the securities markets. The SEC will not allow it, and to prove it, they will never release what they know about the massive violations at the option exchanges. Adios Amigos