Re: [SuperTraderKarenStudy] ES vs SPX


Nov 14, 2015

 


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#5324 Nov 14, 2015

�� Tasty trade had a segment on Friday [11/13] called ��" Index Products vs ETF s Slippage " , which claimed the return on capital on Futures was MUCH ��higher than Index options , because of the margin requirements ... Not sure if it was in contrast to Portfolio Margin or Reg Margin ... Does anyone in the group have any thoughts or input on Futures ? Is it worth switching to? Pros and cons ? Of course ,one would trade much less size with futures ,but if you can get same returns with less margin used , wouldn't that circumvent a major fear of premium selling ,which is a margin call ??��Victor��



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#5325 Nov 14, 2015

Hi Vic,

I trade the ES mini futures (and commodity futures) in my after tax account. ��The span margin is extremely efficient and I'm often times using as little as 10-15% of my accounts buying power. ��I also like the ability to trade it after hours which helps with adjustments when were having big moves after hours. ��That being said the sizing is important...for example with the rally up I was using about 30-40% of buying power across 6 ES contracts when we were at 2100. ��I usually trade 100 point spreads as far out of the money as I can and still get some premium. ��It's as close I can get to going naked until I get portfolio margin. ��The ES minis also are tax advantaged similar to the SPX (i.e. 60/40 rule). ��I trade SPX in my IRA...can be sometimes difficult to get fills at the price I want, ES seems much more liquid. ��SPY seems more liquid but giving up the extra commission for more contracts seemed like I was giving away my profits.

Mike ����



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#5330 Nov 15, 2015

Thanks Mike ... But why would you even need Portfolio Margin if the Span Margin allows more leverage ��and less commission cost ? Are the premiums received ��the same as the Index Options ?��

From: "pawelekm@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Saturday, November 14, 2015 7:02 PM Subject: [SuperTraderKarenStudy] Re: Trading Futures vs SPX

��Hi Vic,

I trade the ES mini futures (and commodity futures) in my after tax account. ��The span margin is extremely efficient and I'm often times using as little as 10-15% of my accounts buying power. ��I also like the ability to trade it after hours which helps with adjustments when were having big moves after hours. ��That being said the sizing is important...for example with the rally up I was using about 30-40% of buying power across 6 ES contracts when we were at 2100. ��I usually trade 100 point spreads as far out of the money as I can and still get some premium. ��It's as close I can get to going naked until I get portfolio margin. ��The ES minis also are tax advantaged similar to the SPX (i.e. 60/40 rule). ��I trade SPX in my IRA...can be sometimes difficult to get fills at the price I want, ES seems much more liquid. ��SPY seems more liquid but giving up the extra commission for more contracts seemed like I was giving away my profits.

Mike ����



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#5331 Nov 15, 2015

Vic,

That's a good point, I guess I was assuming that portfolio margin would be more efficient than span but I haven't done the calculations. ��It's much more efficient for me than reg-t, so if you already have PM it may not be much of a difference.

Commission for me is 1.41 per ES contract on IB vs ��1.5 per SPX contract on TOS through dough. ��But the ES futures are half the size so double the commissions. ��I'm probably not getting a great rate through IB...based on previous posts from the group sounds like I should be able to negotiate that down.

Did a quick check on premium received between the two and it looks about the same when you take into account the 10 point difference in the futures vs the cash index i.e. ES Dec 31, 2100 call mid price is $550 vs SPX Dec 31 2110 call mid is $1040.

Mike



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#5335 Nov 16, 2015

Thx Mike and Vic!. This is an eye opener.. Mike, Just wonder what your TOS futures commission is?. Does the IB $1.41 include the exchange fee too? ��-wende From: supertraderkarenstudy@yahoogroups.com [mailto:supertraderkarenstudy@yahoogroups.com] Sent: Sunday, November 15, 2015 11:24 AMTo: supertraderkarenstudy@yahoogroups.comSubject: Re: [SuperTraderKarenStudy] Re: Trading Futures vs SPX



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#5347 Nov 16, 2015

Hi Wende,

The 1.41 at IB includes exchange fees, looks like 3.42 (also with exchange fees) when I plug it into TOS but I haven't traded any futures with my IRA which is on TOS.

Mike



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#7429 Jun 6, 2016

Ok guys, someone please help me out and show me what I'm missing.

Since last night's ES conversation, I've been investigating the differences between selling PUTs on the ES and on the SPX.

First, know that I use ToS and I do not use a PM account.

I'm seeing a massive margin requirement difference, or buying power difference, any way you want to look at it.

I've look at premiums received, rates of decays, etc., etc., .and they are identical in those regards.

I know a ES contract can be assigned if you expire ITM and SPX is cash closed. Owning two ES contracts and closing them immediately is not a huge concern.

So what big pink elephant in the room am I missing?

If I'm not missing anything, why the heck does anyone use the SPX contract to sell PUTs, or premium in general?

Thanks for any and all feedback,

Rob



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#7430 Jun 6, 2016

Read up on span margin.. Very different sort of algorithm.

I trade SPX options because the margin given me by portfolio margin is more than enough to do what I need to do to achieve my 25-30% return / year. .

I don't see value in the ability to hedge with /ES and the extra costs of trading those options (2x the contracts and 2x the commission) could cost me more than $50K / year.







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#7431 Jun 6, 2016

Roger that Tyler and thanks for the reply..And yes, I definitely get that. If you are doing large volume, the commissions become very significant. This is why I personally have never used the SPY..

I've been selling three SPX puts per "cycle" here so moving to six ES puts will not be a game changer commission wise.

I will read up on SPAN and I will also take the lazy road and call ToS and put it on speaker and sit back and have some kid explain it to me, complete with whatever warnings they care to divulge.

Anyone else got anything on this topic?

Thanks,

RM



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#7432 Jun 6, 2016

Hi Rob,

Ralph is the specialist go to guy for your question, he did some work and the end result was that PM and Spam at the end where very close. Thing with spam when you sell far far out the money it does not grab lots of buy-in power, but but when the positiongoes agains you the margin (spam buying power) will jump on you very fast, super fast. This is why a lot of people we take into account what would the margin be when ATM, so no surprises later on. When this kind of thing happens the P/L goes to hell and itstough mentally on a lot of people. But as with everything if you have knowledge of the product you can take advantage. Same thing with futures contracts like Oil or Gas, people get surprised.��

With this said, if you want more leverage and don't have right now Portafolio Margin account, one way��is to use the futures ES cause spam gives you more leverage than normal margin account.

Saludos,

Antonio





From: supertraderkarenstudy@yahoogroups.com supertraderkarenstudy@yahoogroups.com> on behalf of Tyler Jewell tylerjewell@... [supertraderkarenstudy]supertraderkarenstudy@yahoogroups.com>

Sent: Monday, June 6, 2016 8:32 AM

To: supertraderkarenstudy@yahoogroups.com

Subject: Re: [SuperTraderKarenStudy] ES vs SPX��



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#7433 Jun 6, 2016

Antonio,

Thanks for the input. I'm familiar with the added sensitivity of options on a futures contract from my limited trades on the /CL.

What I will do is investigate a bunch of these potential trades, without executing them, at various distances ranging from ATM to 5 delta or more.

Much appreciated Ant.

Ralph?

RM



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#7438 Jun 6, 2016

Tyler is right. Just because you can trade more contracts with ES doesn't mean you should.��The only time I see value in ES is when you do get in a dire situation where your SPX options cause a margin call. In that situation instead of closing down a position and eating the loss, just move it to /ES and save that margin to keep that position on (assuming you want to keep it on)

ES trading costs are just way too high, not cash settled, after hours trading can have some crazy moves��

Now one thing I am thinking about though....since the non-stressed ES is much lower, it gives room to buy into some short term t bills and make up the commissions cost that way.��



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#7443 Jun 6, 2016

radjamax



I like this kind of advice: .Tyler is right. Just because you can trade more contracts with ES doesn't mean you should..

I'm.just.collecting facts, but hey, gotta take it all I rekon.

Anyway, thanks for your.thoughts.on the ES options. Much appreciated and some good points in there.

RM



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#7474 Jun 7, 2016

@Tyler:

I've spent a couple of days now reading up all your posts. ��I'd be reading them again to better understand.

you've mentioned about excel sheet that throws up the number of lots/strike to select. ��can you share the same OR can you provide some inputs as to how one can create one.

many thanks for sharing your knoweldge.

regards,lokesh



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