This is very useful information for Options trader;
The decision to trade ETF versus Index options is complicated and more dictated by your trading style, the amount you have to trade and your tax bracket. When I trade “in the money” options I prefer Index options because of no early assignment risk. But when I trade OTM options I prefer ETF options because of the smaller premiums for out of the money options, the narrow bid ask spread gets me get better fills with higher credit, plus the high liquidity of SPY in particular means greater ease of closing “out of the money” positions. Your needs may differ. Good luck trader!
Can explain notional size difference between SPX and SPY and what it means?
Thank you for the compliment.
As for your question?: Notional size can be used to describe or compare two trading vehicles of unequal price but proportionate returns. In this case one contract of the SPY costs 1/10 the price of one contract of SPX, but the premium is 1/10 of the size of a SPX contract. So you would need to buy 10 SPY contracts to get the same premium as one contract of SPX. At first this seems like an insignificant difference, but since brokers charge the same price per contract, a trade on the SPY would cost you $20.00 in fees versus $2.00 on the SPX.
Thanks for the question.
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Thank you. I understand!
You are welcome thank you for your comment and your support
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