Using options to trade the SPY System is an interesting
approach. The biggest advantage is you have leverage and defined
risk - sleep easy over the weekend holding a long position for
example.
Think SPY options would be the best bet, though I haven't traded
options on the leveraged ETFs. SPY options have great liquidity and
as a result tight spreads. I'd avoid SPX options as the spreads are
wider and liquidity can be an issue when you HAVE to get out. Think
you will need to have rules for volatility. With the VIX below 15
now is a great time to buy as premium is cheap. When the VIX is
above 25 or 30 premiums are higher as is risk of vol deflation.
Anyway, a big issue is it's very challenging to back test
results. I'm going to stick with the leveraged ETFs and will
consider futures as well.
SPY System and Options
Posted by cclammers on 29th of Apr 2011 at 08:55 pm
Is anyone considering using options for the SPY or other appropriate ETF's in conjunction with the systems signals?
LEAP Spreads and so forth, defined risk for $s and time
Posted by cubby on 1st of May 2011 at 08:07 pm
Vertical Option Spreads is a great way to gain leverage!
One might find a winner cut short, if the underlying index runs through the spread.
But the approach is quite sound, without the unlimited risk of ES futures.
And since the futures are generally settled within a few months or have no liquidity, the use of LEAPS can solve two problems.
One can have the luxury of lots of time and strictly defined risk.
Perfect!
Options
Posted by tumbler on 30th of Apr 2011 at 06:12 pm
Using options to trade the SPY System is an interesting approach. The biggest advantage is you have leverage and defined risk - sleep easy over the weekend holding a long position for example.
Think SPY options would be the best bet, though I haven't traded options on the leveraged ETFs. SPY options have great liquidity and as a result tight spreads. I'd avoid SPX options as the spreads are wider and liquidity can be an issue when you HAVE to get out. Think you will need to have rules for volatility. With the VIX below 15 now is a great time to buy as premium is cheap. When the VIX is above 25 or 30 premiums are higher as is risk of vol deflation.
Anyway, a big issue is it's very challenging to back test results. I'm going to stick with the leveraged ETFs and will consider futures as well.
I was considering using in-the-money
Posted by ascr on 30th of Apr 2011 at 02:01 am
I was considering using in-the-money LEAP options, but opted for 3x ETFs. It's just way easier to get a hold of the data to back-test ETFs.
I am trading SSO/SDS and looking into verticle spreads on SPY
Posted by MT_pockets on 29th of Apr 2011 at 09:19 pm
I am planning on trading options
Posted by kattap on 29th of Apr 2011 at 09:10 pm
I am planning on trading options on very small amount for the symbol SPY.
Thanks
kattap