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Trading SPY Options (Letter to the Editor)

 
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PostPosted: Sun Apr 09, 2006 10:11 am    Post subject: Trading SPY Options (Letter to the Editor) Reply with quote

Hi XXXX, I doubt there's a good formula for SPX and SPY options, because hedge funds use ETFs to hedge, which cause larger SPY price movements. For example, on Fri, SPX traded roughly on average volume, while SPY traded 33% above average volume. I also compare SPX and SPY option prices. SPX futures tend to lead the actual SPX price, which influence both SPX and SPY option prices. Sometimes, SPY is higher than SPX and vice versa, and sometimes they're almost the same. I've noticed when SPX is rising, SPY is higher than SPX and vice versa, although I haven't followed that much. I like using SPX next month options for shorter-term trades, and SPY options for longer-term trades, because commissions are cheaper, for the short-term trades. However, what's important is the expectation how much the options will be in-the-money when they expire. Also, when SPX rises or falls to the first resistance or support level of the day, then the options can be bought more cheaply, than later in the day when those levels are known and tested. I hope this explaination helped. Arthur

Art . I am trading almost exclusively the SPY either long or short. I am
> lining the SPY up with the SPX using your support and resistance levels
> Would you give me a close formula for trading the SPY lined up with the
> SPX. Example is when the SPX is at say 1300 the SPY should be at ???.
> Hope your doing well . Thanks XXXX
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