Question: option on stock versus option on SSF

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Subject Author Date Question: option on stock versus option on SSF cathy.koch 07-06-2008  Re: Question: option on stock versus option on SSF Paul 07-06-2008
Posted by cathy.koch on July 6, 2008, 3:31 pm How does the premium on an option on a stock compare to the premium on an option on a Single Stock Futures contract for the same stock? Is there a rule of thumb? thanks cathy Posted by Paul on July 6, 2008, 7:31 pm Hi Cathy: All I can tell you is what I know about SSF's from my own limited experience. The only one's I've traded so far have been those on three of the major stock index ETFs, specifically QQQQ, SPY, and DIA. I was very disappointed with single stock futures, as the fills I got were terrible. Simply stated, the volume and thus the liquidity necessary to make SSFs viable for trading just isn't there yet, though this situation may change in the future if more people start trading them. SSF contracts are similar to stock options in that each one controls 100 shares of the underlying stock. But the spreads are too large, the fills are not good, and the movement too erratic for my taste. You'd probably be better off sticking with the underlying, or else with at-the-money options if you know how to trade this type of derivative. It all depends on your view. If you were trading for the very long-term and were sufficiently comfortable with the margin risk, then SSFs might make more sense. But for daytrading purposes it's generally better to stick with the stock, or perhaps one of the more popular emini stock index futures such as the ES or NQ. For swing trades of a few days to a few months, I personally feel that options are the best way to go. However, it would be very wise to learn as much as possible about the unique characteristics of options before attempting to trade them live. - Paul On Sun, 6 Jul 2008 12:31:06 -0700 (PDT), "cathy.koch" >How does the premium on an option on a stock compare to the premium on >an option on a Single Stock Futures contract for the same stock? Is >there a rule of thumb? > >thanks > >cathy Similar Threads Posted "Stock Option Trading For Explosive Monthly Returns!" May 12, 2008, 4:15 am "Stock Option Trading For Explosive Monthly Returns!" May 19, 2008, 4:27 am future &option May 1, 2007, 10:16 am A Ratchford Option..... July 21, 2007, 3:04 pm The Option Backspread May 13, 2008, 11:39 am option writing success August 5, 2006, 12:33 pm Commodity Option Trades August 8, 2006, 5:39 am Ratio Option Spread May 1, 2008, 9:20 am Test your Option strategies before you dive in! October 6, 2006, 10:30 am Online Option Strategy Analyzer November 6, 2006, 1:45 pm