IG Index for Trading Index Options

[clbfjc]

Hi,

I am interested in trading Index Option, maybe looking at Selling Spreads. I am based in the UK, would be interested to know if using IG is viable options. I would suggest the spreads a wide but I am not looking at short term plays.

My trading history, I used to scalp Bund, Bobl Shatz back in the day, like most had good and bad days and now of the opinon that isnt the easiest way to make money with all the HFT bots on those markets. I havent traded for a while and looking for alternative methods why in a full time job.

Therefore thinking of options, specifically selling and taking advantage of time decay?

Peoples thoughts are much appreciated. Not looking to make a killing striaght off the bat, get using to adjusting positions and manageing over time.

 

[kalott]

http://www.ig.com/uk/demo-account

 

[punjabi]

I trade options with IG (and used to with 3 other spreadbet brokers). I also trade options 'properly' with Sucden and Interactive Brokers. You'll find the spreads on IG (and other SB providers) are very
large compared to bona-fide options trading. Eg 20-14 rather than 22-23. Also, be careful not to
over-leverage yourself - the SB companies, the margin requirements for selling short options are VERY
low.....I badly burnt myself 2 years ago with over-leverage. I find that I cannot go in-and-out of a
trade with SB traded options as I can with Sucden (due to the spreads).

All the best.

 

[Hittfeld]

I trade options with IG (and used to with 3 other spreadbet brokers). I also trade options 'properly' with Sucden and Interactive Brokers. You'll find the spreads on IG (and other SB providers) are very
large compared to bona-fide options trading. Eg 20-14 rather than 22-23. Also, be careful not to
over-leverage yourself - the SB companies, the margin requirements for selling short options are VERY
low.....I badly burnt myself 2 years ago with over-leverage. I find that I cannot go in-and-out of a
trade with SB traded options as I can with Sucden (due to the spreads).

All the best.

Trading also through IG and IB I can only confirm your experience. But if you trade with Sucden -- why not look at Saxobank (or HMSDotLu or Cornerbank)? I quess its all the same engines behind.

Regards

 

[Hittfeld]

Hi,

.....

Therefore thinking of options, specifically selling and taking advantage of time decay?

Peoples thoughts are much appreciated. Not looking to make a killing striaght off the bat, get using to adjusting positions and manageing over time.

Well for a start why not follow one of the traders at Tastytrade`s newborn, Dough.com (This is a free site -- so no commercial here)? Robyn is one many follow.

And use the TRADE button to get to their marvellous analytical tool, second only to TOS, better and easier than IB`s. But US symbols only.

At one of my accounts I trade according to the rules of KAREN SUPERTRADER. Mid term, 56DTE, but succelsful. BTW she is a real person, running real funds and making real profits. Just watch the interviews on youtube or tastytrade.

Finally I could recommend to read Ron99 at bigmike. Even slower, far more otm (delta 0.02) roughly 25% otm 90DTE.

All the best

 

[moka2]

Hi,

I am interested in trading Index Option, maybe looking at Selling Spreads. I am based in the UK, would be interested to know if using IG is viable options. I would suggest the spreads a wide but I am not looking at short term plays.

What time duration are you interested and which Index
if it is 1 week + then I would suggest stick to Proper Exchange traded Options on CME/ ICE etc ( Or UK /EU based exchanges).
Why go with Market Maker type "brokers" and take a chance with "Conflict of interest"when you can deal on a exchange and get the transparency that goes with it
Any major UK/ USA regulated FCM will be good
UK better because you get FSCS insurance protection which you don;t in USA

 

[clbfjc]

Hi All,

Thanks, I wasnt looking to be actively in and out ie scalp, I was looking just to take advantage of time value, and maybe by cash secured puts, if I get called, take the stock and then maybe write some covered calls and build it up. However

punjabi,

Looks like you are in and out quite regulary, can you let us know more? I would be interested to know if you can use options to day trade. I never really looked at this avaneue.

 

[moka2]

Hi All,

Thanks, I wasnt looking to be actively in and out ie scalp, I was looking just to take advantage of time value, and maybe by cash secured puts, if I get called, take the stock and then maybe write some covered calls and build it up.

That is only possible with exchange traded options not the Binary Options offered by IG / Nadex etc
Exchange Traded Options are mostly settled / covered by actual stock (or futures contract + you get lot more "options" so to speak

For example
Index SPX
ETF on SPX = SPY
Options on SPY
Futures on SPX = ES or SP
Options on ES and SP
etc
Mush better choice then OTC option/ Binary options
I hope you get the point

 

[clbfjc]

Hi Moka,

I understand the difference was defiantly not getting involved in Binaries. Do you guys day trade options as well then, maybe looking to take a few ticks out of the market?

 

[moka2]

Hi Moka,

I understand the difference was defiantly not getting involved in Binaries. Do you guys day trade options as well then, maybe looking to take a few ticks out of the market?

Sorry but not sure what exactly you want to know
Your original question was "I am interested in trading Index Option, maybe looking at Selling Spreads. I am based in the UK, would be interested to know if using IG is viable options.

- IG or it's equivalent in US NADEX has fixed risk Bull spreads, Is that what you are talking about when you mention "selling Spreads" or Exchange Traded Options spreads like Calender/ vertical etc

 

[clbfjc]

Really looking at exchange traded but orginally was thinking I can replicate through a spreadbet medium

 

[options-george]

My understanding was that selling spreads or trying to take advantage of time decay is a losing strategy UNLESS you are able to either correctly anticipate changes in implied volatility OR correctly predict price in the underlying instrument, and get the prediction correct within the time window of the trade entry and the option expiration date. Am I wrong on this point?

So I have always thought that the only way I could make money doing this in the long run is by being better in my predictions than the market-maker responsible for my particular instrument.

Selling time decay is going to produce winning trades a lot of the time - however I would eventually get stung with a very large losing trade which would wipe out all of my small gains.

I am not sure whether people agree with this view or not - but I'd love to hear comments on this one!

 

[clbfjc]

I would be interested in this as well. I have been looking into the possiblity of trading stock options, selling puts for stocks I wouldnt mind owning at certain price levels. If I get hit then sell covered calls against the stock position I then own to reduce my cost basis. Simple strategy, but how effective is it. I see it a bit like bidding on a property under market value, if the bid is accepted then renting it out until the market dictates its time to sell. Just with options / stocks you dont have lanlords in the house to trash it nor do you need to worry about spending months to complete a deal.

 

[punjabi]

clbfjc, you wrote "Looks like you are in and out quite regulary, can you let us know more? I would be interested to know if you can use options to day trade. I never really looked at this avaneue."

I don't day-trade option per se....however a few times in the last 4 years, the market has moved so
much in one day that I will close out a position that I had opened that morning. My timescales though are up to a month long - I normally expect to close out most open position just before expiry.

" I have been looking into the possiblity of trading stock options, selling puts for stocks I wouldnt mind owning at certain price levels". Maybe I've missed the earlier posts, but spread-betting won't
allow this - you need a proper broker account trading 'real' options (Sucden/IB etc).

"I see it a bit like bidding on a property under market value, if the bid is accepted then renting it out until the market dictates its time to sell. Just with options / stocks you dont have lanlords in the house to trash it nor do you need to worry about spending months to complete a deal."
Yep, done both of these things, and have had houses trashed. However, it's not always as easy with
buying stocks on the cheap if the short puts are exercised and simply writing covered calls against
them. Often, the underlying stock keeps on falling and falling - to the point that it is much lower
than the price you bought it at, and to sell covered calls at this greatly reduced price is not easy.
Eg. Stock priced at 600p, you sell naked put at 520p. Stock falls to 450 and you get assigned.
You wait to see if it rises a little before you sell a covered call at 500. But the stock now falls to
400. What do you do? Think Tesco last year.

I sat on ARM shares for over 10 years in a similar situation.

 

[moka2]

CCP and then CC pitfalls

Punjabi
You are spot on about your last para
Unfortunately people and companies who are in the business of "Selling Trading education" ( read all claims no proof of trading etc) sell this idea of "It is just like renting a house" to gullible people.
If stock tanks and either never recovers or takes too long to recover then you are screwed...CCP and CC premiums MAY not recover the loss.
But they don;t tell you that,

 

[clbfjc]

H Guys,

Thanks, i here what you are saying, what I was looking to do through IG is synthetically recreate the same p/l profile. I realise you cant get assigned and there contracts are cash settled.

Looks like the option horizon is typically a month and they are not really useful fro intraday scalping? I am not planning on scalping as I do have a full time job, was more interested to hear if anyone using them for that.

I undertstand options trading is not as simplistic as Renting out a house, however I it is a viable option. And its how you manage the positions once they are on. I am looking to become more stratigically positioned rather than simply outright trading stocks and belive options can provide me with this and at the same time allow me to reduce cost basis on stocks I may actually want to own.

 

[Windlesham1]

IG prices are horrible for FTSE options-when you have a spread in the exchange traded product amplified by IG,you take a 50% haircut. Binaries may be better as it's only their spread.
I've been trading ftse options for 16 years-and I make money.

 

[moka2]

IG prices are horrible for FTSE options-when you have a spread in the exchange traded product amplified by IG,you take a 50% haircut. Binaries may be better as it's only their spread.
I've been trading ftse options for 16 years-and I make money.

Trying to compare apples to apples ( no pun intended)
The shortest duration for a Exchange traded Option spread is 1 week
And only on last day the expiry of ETS and Nadex IF can match
8 hrs//6/4/2 rtc
Has anybody studied the two

SO on other days how does Nadex/ IG hedge their risk ( or the market makers on the Nadex)

 

[bjdon]

I currently mainly 'Write' (short options) with IG and so far I've found it quite profitable. Basically I only short very out of money exchange options with at least a months worth of time. My thinking being I get the time decay with little chance of the options finishing in the money. As always you need to have firm stop in place in order to avoid being stung should the trade move against you, however I find that if you select the correct strike then you should normally be ok.

 

[clbfjc]

Hi, have you been selling OTM puts? Also what do you do if you get tested, do you simply stop, or do you roll the position, either further OTM or to the next month?