Over the course of the last couple of years we have seen more and more liquidity drawn to major index options and they have become very powerful additions to any trader’s arsenal.
When it comes to short term equity trading, finding high priced stocks that have consistently large range and tons of liquidity is very important but there are not that many of them out there. Imagine a stock priced at roughly $2300 per share, with an average true range of 15 to 50 points per day, all the liquidity that you could want, and several times the underlying market cap of any individual US listed security. That is the cash settlement SPX option contract and that is just one of the major index options available.
While a product like the SPX option is exceptionally alluring to the traders that have the highest risk profiles, directional positions might be more risk than other traders are comfortable with. Even if that is the case, the robust and liquid options allow for many spread strategies that help to tone down the otherwise high risk. Volatility arbitrage and vertical/horizontal spread trading are some of the methodologies available for traders to engage index options trading while keeping risk well defined.
Great Point is happy to have access to these powerful trading vehicles and offer them to our proprietary traders. Looking at the liquidity available in the major indices on any given day, it is not hard to see the growing importance of these products. Whether as a hedge against equity ownership, as a spread trade, or a very high powered way to take an outright position, having access to these important options can be a key component to a well-rounded trader’s overall success.
If you are a group that is trading Index Options already in any capacity please reach out to us right away to see if we might be able to structure a better deal for you. We look forward to hearing about your approach and analyzing if it is a good fit for us here at Great Point. We can offer both retail and proprietary account structures to fit almost any desired setup. Partner with our brokerage as a platform to operating your options trading group and leave all the back office hassles to us.