Using options to front-run and "back-run"

Discussion in 'Index Futures' started by Ansare, Dec 22, 2011.

  1. Ansare


    Posted this in another (and probably inappropriate) forum earlier but either here or "Options" probably makes more sense. Try here first.


    I trade only /es and /yi or /si. My knowledge and experience with options is very limited.

    There are times when I am ready to stick a toe in the water but don't want to commit to a full contract. So, if I wanted to buy, say, 1/3 of an /es position that would mean an investment of 50 x current price, say 1200, divided by 3, or 20k. Two questions 1) is it best to use SPY, SPX or /ES options? 2) I know I want a 20k investment in the "market," but am totally unclear how to determine the number of options necessary.

    On the sell side, if I'm short 1 contract of /yi, and want to protect profits yet keep a 25% position by buying SLV puts, how do I determine exactly the number of options to buy? If /yi's at 30, a 25% position would equal 7,500.00. I've now exhausted my limited math skills.

    TIA for any assistance. Merry Christmas and Happy Holidays to all.
  2. If your looking to fractionalize ES : 5 Spy = ES so you can take SPY positions that are 20%,40%... relative to ES. They closely track but drift and quarterly settlements leave you exposed for an entire friday and over the weekend.

    Spy options are tight... typically 0.01 spread ES options are often 2 ticks wide. $25 / $5 typical spread differential.

    Play around with making Synthetic Longs, shorts, straddles etc. using combination of future and equity options. Unless your a market maker you will not qualify for cross margining.

  3. Ansare


    Thanks for your response, PocketChange. Give me a lot to look at and it's appreciated.
  4. newwurldmn


    I think you mean 5 lots SPY = 1 ES contract or 500 SPY = 1 ES.