Trading DAX futures, protection with DAX options?

Discussion in 'Index Futures' started by krazy, Oct 23, 2006.

  1. krazy


    Hello all,

    I’m new to this forums, so here goes :)

    I am trading DAX futures, however I had a small question in regards to the DAX options that you can buy/sell and how they relate to the futures.

    First off; When looking at the DAX options in IB, it says that the options ‘multiplier’ is 5. What exactly does this me/how does it work?

    Second following on question; If I am long one DAX future, and I wanted to protect my downside risk, by buying an ‘At-The-Money’ (ATM) DAX Put option, what is the ratio needed to provide complete protection? (I realise that I will still have at risk the premium I paid for the option(s), but no more)

    If I buy 1 future, and just 1 ATM Put, that obviously does not seem to cover me completely and I will still require huge overnight margins.
    Is it 5 options to every 1 future contract, in order to equally counter-balance them?

    Basically, I should be able to own DAX futures, and buy puts against them, and reduce any large overnight margins I have to a margin that is only the cost of whatever I paid for the put options ... limitied/known risk ... no?
    I am just wondering how the mechanics of it works, and what the ratio of Options-to-Futures is.

    And I’d just flip the whole thing over if I were selling futures . . .

    I may have a few more questions coming, but I was hoping that there would be somebody who may be able to help . . . it would be greatly appreciated :D

    Thankyou kindly for your time,
  2. I can't say that it is a good idea to ban members that contribute to the board, while hundreds of garbage spewers lurk,

    The options on Dax multiplier is 5 while the future are 20. You may want to look at Eurostoxx 50 futures and options that I believe have the same multiplier and would be margined as such. Not to metion that Eurostoxx 50 is at least as liquid as dax futures
  3. krazy


    Hi, thanks for the reply :)

    So basically, if i read you right, i need four DAX options to cover one DAX future, margin wise?

    And i'll certainly check out the other alternative you suggested.

    Thanks again,