European Style Index options trading in Australia

[tradeanalyzer]

Hi All,

I am mostly interested in trading Credit Spreads/Iron Condor strategies to generate slow passive income.

What are the European Style Index options that can be traded from Australia , Syd/Mel time?

SPX and (XSP) options are European style (cash-settled without early assignment risk)

Whereas SPY is American Style option (early assignment risk)

But these are US based and do not run during day time in Australia. SPX and XSP is said to be trading in Global trading hours but its not properly implemented in IBKR.

So any suggestions?

 

[JohnDe]

Hi All,

I am mostly interested in trading Credit Spreads/Iron Condor strategies to generate slow passive income.

What are the European Style Index options that can be traded from Australia , Syd/Mel time?

SPX and (XSP) options are European style (cash-settled without early assignment risk)

Whereas SPY is American Style option (early assignment risk)

But these are US based and do not run during day time in Australia. SPX and XSP is said to be trading in Global trading hours but its not properly implemented in IBKR.

So any suggestions?

Yeah, when the media is raving about something, the best has already gone.

 

[wayneL]

Hi All,

I am mostly interested in trading Credit Spreads/Iron Condor strategies to generate slow passive income.

What are the European Style Index options that can be traded from Australia , Syd/Mel time?

SPX and (XSP) options are European style (cash-settled without early assignment risk)

Whereas SPY is American Style option (early assignment risk)

But these are US based and do not run during day time in Australia. SPX and XSP is said to be trading in Global trading hours but its not properly implemented in IBKR.

So any suggestions?

I would research when assignment is likely and not likey, all mathematics, extrinsic value, cost of carry, risk free rate etc.

The market marker ain't going to exercise on you outside of these parameters. Some other dopey counterparty might, but very rare (because they will be throwing any of their extrinsic value in the rubbish bin.

 

[tradeanalyzer]

I would research when assignment is likely and not likey, all mathematics, extrinsic value, cost of carry, risk free rate etc.

The market marker ain't going to exercise on you outside of these parameters. Some other dopey counterparty might, but very rare (because they will be throwing any of their extrinsic value in the rubbish bin.

Thanks a lot for the response. yeah, agreed. But one thing to note here is that the OTM credit spread may be in the money when the expiry is near by and one may convert iron condor into iron fly and no one wants the assignment concept to interfere the fire fighting. So the cleaner way to trade options is European style. So which European style options trading is available to trade in Syd/Mel time?

 

[wayneL]

XJO are euro.

 

[tradeanalyzer]

XJO are euro.

Thanks again. But XJO/ASX200 options are liquid enough to trade? heard like the spread/bid-ask is high.

 

[wayneL]

Thanks a lot for the response. yeah, agreed. But one thing to note here is that the OTM credit spread may be in the money when the expiry is near by and one may convert iron condor into iron fly and no one wants the assignment concept to interfere the fire fighting. So the cleaner way to trade options is European style. So which European style options trading is available to trade in Syd/Mel time?

Thanks again. But XJO/ASX200 options are liquid enough to trade? heard like the spread/bid-ask is high.

TBH I don't believe any Aussie options are liquid enough for what you want to do and Aussie RTs are among the most larcenous on the planet.

BTW, when I was trading wing spreads on the US options market, I was never assigned, ever. I just made sure to get out of Dodge before that risk ever presented itself.

And just to reiterate, I wouldn't even think of trading like I did, on the Aussie market.

FWIW

 

[Gunnerguy]

STW has quarterly options, European I believe

 

[tradeanalyzer]

TBH I don't believe any Aussie options are liquid enough for what you want to do and Aussie RTs are among the most larcenous on the planet.

BTW, when I was trading wing spreads on the US options market, I was never assigned, ever. I just made sure to get out of Dodge before that risk ever presented itself.

And just to reiterate, I wouldn't even think of trading like I did, on the Aussie market.

FWIW

ok, thank you very much for the response.

 

[tradeanalyzer]

TBH I don't believe any Aussie options are liquid enough for what you want to do and Aussie RTs are among the most larcenous on the planet.

BTW, when I was trading wing spreads on the US options market, I was never assigned, ever. I just made sure to get out of Dodge before that risk ever presented itself.

And just to reiterate, I wouldn't even think of trading like I did, on the Aussie market.

FWIW

US market is open only in the midnight of Australia which is certainly not a convenient time to trade. Is there any other index options that are tradable during Australia Day time? For example, IBKR allows to trade globally. Any Europe/Asian markets index that has good liquidity to trade options?

 

[Sharkman]

Thanks again. But XJO/ASX200 options are liquid enough to trade? heard like the spread/bid-ask is high.

i don't really trade XJO options these days, but when i used to (a few years ago), as is the case with ASX stock options, the bid-ask spread when looking to open a position usually wasn't that big of a deal. just chuck in your bid or offer at the mid, if it doesn't get filled, move it in a tick, and keep doing so until you get filled or you don't feel like crossing any more of the spread. if it's near the money (typically 25'ish delta and above is near enough) on 1 or 2 month contracts, you'll often get filled within 2 ticks (their side) of the mid. further OTM or 3+ month they usually make you cross more of the spread.

when trading ASX stock options i start all the way on my side of the spread and keep moving it in one or two ticks at a time until i get filled or i reach my threshold (usually i won't go more than 2 ticks their side unless i really want the position). on the odd occasion i get filled a few ticks on my side, it's only a few mouse clicks so might as well give it a shot in case it's one of those occasions where you can snipe an extra few hundred bucks or so.

closing out a position however can be a totally different story. the more desperate you are to close out a position, the more of the spread the MMs seem to make you cross to do so. they can smell it a mile away. that's why these days i mainly sell covered calls over stock holdings i don't mind getting called away at the strike, and sell naked puts on stocks i don't mind taking delivery at the strike, usually wrapped around a dividend stripping strategy. makes things simpler, i can open a position, get the mid or close enough to it, then just let it run to expiry and take the assignment if i have to, without worrying too much about what sort of spread i might have to cross to close out.

 

[tradeanalyzer]

i don't really trade XJO options these days, but when i used to (a few years ago), as is the case with ASX stock options, the bid-ask spread when looking to open a position usually wasn't that big of a deal. just chuck in your bid or offer at the mid, if it doesn't get filled, move it in a tick, and keep doing so until you get filled or you don't feel like crossing any more of the spread. if it's near the money (typically 25'ish delta and above is near enough) on 1 or 2 month contracts, you'll often get filled within 2 ticks (their side) of the mid. further OTM or 3+ month they usually make you cross more of the spread.

when trading ASX stock options i start all the way on my side of the spread and keep moving it in one or two ticks at a time until i get filled or i reach my threshold (usually i won't go more than 2 ticks their side unless i really want the position). on the odd occasion i get filled a few ticks on my side, it's only a few mouse clicks so might as well give it a shot in case it's one of those occasions where you can snipe an extra few hundred bucks or so.

closing out a position however can be a totally different story. the more desperate you are to close out a position, the more of the spread the MMs seem to make you cross to do so. they can smell it a mile away. that's why these days i mainly sell covered calls over stock holdings i don't mind getting called away at the strike, and sell naked puts on stocks i don't mind taking delivery at the strike, usually wrapped around a dividend stripping strategy. makes things simpler, i can open a position, get the mid or close enough to it, then just let it run to expiry and take the assignment if i have to, without worrying too much about what sort of spread i might have to cross to close out.

Thank you very much for the detailed response. Taking delivery is not the cup of tea for those who trade with lower capitals So the original question is still open which index option(European style and liquid enough) can be traded during day time in Australia. Searched hard so far and did not find any answer.

 

[wayneL]

i don't really trade XJO options these days, but when i used to (a few years ago), as is the case with ASX stock options, the bid-ask spread when looking to open a position usually wasn't that big of a deal. just chuck in your bid or offer at the mid, if it doesn't get filled, move it in a tick, and keep doing so until you get filled or you don't feel like crossing any more of the spread. if it's near the money (typically 25'ish delta and above is near enough) on 1 or 2 month contracts, you'll often get filled within 2 ticks (their side) of the mid. further OTM or 3+ month they usually make you cross more of the spread.

when trading ASX stock options i start all the way on my side of the spread and keep moving it in one or two ticks at a time until i get filled or i reach my threshold (usually i won't go more than 2 ticks their side unless i really want the position). on the odd occasion i get filled a few ticks on my side, it's only a few mouse clicks so might as well give it a shot in case it's one of those occasions where you can snipe an extra few hundred bucks or so.

closing out a position however can be a totally different story. the more desperate you are to close out a position, the more of the spread the MMs seem to make you cross to do so. they can smell it a mile away. that's why these days i mainly sell covered calls over stock holdings i don't mind getting called away at the strike, and sell naked puts on stocks i don't mind taking delivery at the strike, usually wrapped around a dividend stripping strategy. makes things simpler, i can open a position, get the mid or close enough to it, then just let it run to expiry and take the assignment if i have to, without worrying too much about what sort of spread i might have to cross to close out.

OP is wanting to do wing spreads with position adjustments as appropriate.

Do you think it is feasible, considering the greatly increased ¹contest risk compared to US options?

¹ multiple wider spreads, slippage, plus brokerage

 

[tradeanalyzer]

OP is wanting to do wing spreads with position adjustments as appropriate.

Do you think it is feasible, considering the greatly increased ¹contest risk compared to US options?

¹ multiple wider spreads, slippage, plus brokerage

yes, exactly it does not look like feasible. The only European style index options is (SPX and XSP) but that is also not very liquid enough. So left with no other choice apart from 'SPY' which is American Style. But this trades during night time -1.30 a.m. To 8 a.m. Syd/Mel time. If any wild market actions happening that can adversely affect positions. probably trading only quarterly/longer time frame options is the temporary solution.

 

[Sharkman]

OP is wanting to do wing spreads with position adjustments as appropriate.

Do you think it is feasible, considering the greatly increased ¹contest risk compared to US options?

¹ multiple wider spreads, slippage, plus brokerage

nope, i wouldn't do them either. the few times i traded XJO options in the past, it was mainly ATM-25'ish delta bear put spreads to hedge my long stock positions when i felt the overall market was due a bit of a pullback. don't do them anymore.

just wanted to point out that under certain circumstances the wide bid-ask spreads on the ASX aren't all that big of a deal. ended up rambling on a bit longer than i should have, as i sometimes do. but yes OP would need to consider switching strategies if they wanted to mitigate contest risk on the ASX.