Why is the b/a spread so wide on SPX?

Discussion in 'Options' started by wooldog, Dec 29, 2010.

  1. wooldog


    Was looking to enter a position in the SPX, but am really put off by the spreads.


    The Jan 1265 put:


    That's nuts!

    And they all seem to be 3-4 dollars wide. This is insane.

    Even if I could get in at the midpoint, who's to say when I need to liquidate a position, I'd be able to get out?

    Anyone have any experience, opinions on trading the SPX options?

    Why would/should anyone trade this?

    Can the SEC do anything about this? Seems abusive to me.
  2. there has been discussions here over the liquidty and advantages of SPY over ES..

    my question is why trade spx?
  3. cdowis


    After some research, I found the RUT to be my choice.
  4. FSU


    Although the quoted markets are quite wide the "inside markets" where the options actually trade are fairly tight. Good for a professional, but difficult for a public customer.

    Quoted markets should become much tighter soon when SPX options are traded on the new C2 exchange all electronically.
  5. Try spy options. They have the smallest b/a spread.
  6. tomk96


    the spx isn't fully electronic. the screen markets can be vary wide. i would expect that option's real market to be .50 wide. SPY options are electronic and very tight. the SPX will soon be much tighter. sending orders into the SPX electronically can get very frustrating, even when trying to lift an offer or hit a bid.
  7. The SPX is the last bastion of open outcry at the CBOE. The SPX is the only pit at the CBOE that still uses the old school method of disseminating only one MM company's quotes at any given time. There are about 5 different firms that rotate cycles to drive the wide screen markets. It's a painfully antiquated system that they haven't changed because it is still a singly listed product where the exchange and all MM's are making a killing. Noone wants to kill their golden goose.

    As soon as the SPX is listed at the all electronic C2, this should change quickly. In the meantime, trade CME ES options or SPY options.
  8. joe4422


    SPY options are great. Tons of liquidity, very tight spreads.
  9. MTE


    As others have pointed out already, the quoted markets are wide, but you can get much better prices. Also, when you compare SPX to SPY you need to take into account that SPX is 10x the size of SPY so 4.00 in SPX is 0.4 in SPY.
  10. If you trade vertical spreads, as I do, the bid/ask spread is less a concern. I trade index options on SPX, RUT and NDX.
    #10     Dec 30, 2010