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I would like to bet on the increase / decrease of the S&P 500 or the Dow Jones Index. Unfortunately, I can't seem to find any options that are somewhat affordable AND american style (can be exercised at any point, not only on expiration date).

  • XSP options: European style
  • SPY options: American style BUT the settlement is in SPDRs. In combination with the contract multiplier of $100, that means I would have to buy SPDRs worth $20.000+.
  • E-mini S&P 500 options expiration dates are less than a year from now. I would like something a little more long-term, like 2 years.
  • DIA options: American style BUT the settlement is in DIA shares, that's the same problem as with SPY options.

Does anyone know of S&P 500 or DJI options that are American style and for which I don't need $10.000+ to invest?

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    Why do you require american style options? It's almost always better to sell to close than to exercise early. – D Stanley Mar 20 at 12:46
  • The reason why I prefer American style is that I might have a good idea of the general direction the market is going in but I don't know the exact timing when I wanna exit beforehand. With the American style option, I have the flexibility to exit an any point before expiration date. I could also sell the option itself but I'll lose some money due to the spread when selling the option. Am I missing / misunderstanding something? – Sebastian Mar 21 at 0:21
  • Yes, you almost always get more in time value than you lose in bid/ask spread. For example, an in-the-money option with a strike of 25 when the ETF is at 27 might be worth $3. Would you rather spend $25 by exercising the option or get $3 and buy the ETF for $27 (spending $24 net)? – D Stanley Mar 21 at 17:39
  • @DStanley is right, you should never exercise early (assuming the spread of the market isn't crazy bad) as you are losing the value of the remaining time left on the option when it might go further into the money. – ThatDataGuy Mar 25 at 22:29
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Options can be traded for their value at any time, you do not need "American" style options to achieve that. You should NEVER exercise and option early (unless for very specific tax reasons).

Also, you do NOT need the "100 shares" of the underlying worth of cash to buy a Put or a Call option, you only need what the option costs, you never actually have to exercise your option, just sell the option on the day of expiration or before.

Just stick to the SPY, its very liquid. If the cost of the option is getting too high, turn it into call or put spread, cap your profit potential but lower the cost.

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  • "You should NEVER exercise and option early (unless for very specific tax reasons)." Some reasons are discussed here that do not relate directly to taxes. – nanoman Mar 30 at 17:20
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Yeah, the option premiums are the only funds required to take a long option position. The stock broker can just cash settle the option if it is in the money and if the customer didn't close the option position. Obviously, the stock broker wants the closing commissions.

But Micro E-Mini futures are also available. To qualify for futures just first gain experience with options. To qualify for options go to the Options Industry Council website.

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