You could use micros to help target
long-only exposure, or even do some long/
short pairs trading. With micros, you can
target your exposure in any ratio you want.
Hedge during earnings season. When
the market turns volatile, as it often does
during earnings season, you might consider
hedging to minimize portfolio risk. At $50
times the index, and with the SPX at 2900,
that’s a notional value of $145,000 for each
contract of /ES, but only $14,500 for Micro
E-mini S&P 500 (/MES). So whether you’d
like to hedge a percentage of the notional
portfolio value, or if you use beta weighting
to figure your optimal hedge, micros can
help you set the right size. And speaking of
beta weighting, the smaller contract size
can help if you’d like to select di;erent
benchmark indices (SPX, RUT, etc.) for
di;erent parts of your portfolio.
Scale in or out. Ever found yourself sitting
on a winning position and couldn’t decide
whether to hang on or take the money and
run? Perhaps you’re considering two go-to
technical indicators. One says it’s time to
bail, but the other says the trend has room
to run. With micros, you can have (some of )
your cake and eat it, too by scaling in and
out. And scaling strategies will incur additional transaction costs.
REGARDLESS OF YOUR TRADING STYLE
or objective, if you rely on the major indices, CME Micro E-mini futures could be
something to add to your watchlist to help
you better pinpoint your target.
—Words by DOUG ASHBURN
Doug Ashburn is not a representative of
TD Ameritrade, Inc. The material, views, and
opinions expressed in this article are solely those
of the author and may not be reflective of those
held by TD Ameritrade, Inc.
For more on the risks of trading and trading
futures, see page 38, #1 & 3.
Whether you’re a newbie or a pro, volatility
and options greeks can be perplexing.
These tools on your thinkorswim® trading
platform can help keep you in the loop.
Today’s Options Statistics: WHAT’S SIZZLING?
The life of an option trader revolves around
making strategy decisions, and that involves analyzing a bunch of metrics such as implied volatility (vol), historical vol, how many puts or calls
traded, where they traded with respect to bid or
ask prices, and so on. But just knowing the numbers may not be enough. Sure, you may be able
to make more educated trading decisions, but
you should also know what the numbers mean.
We’ll start with some of the options stats.
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