Leverage on options on futures and equities

drftr

Newbie
2 1
Hi,

Considering the most leveraged hedge through options for my ETF portfolio, would I reach more leverage through options on futures than through options on equities?

For instance: When buying the ETF SPY with 95% of my investment, would I reach more leverage when buying 5% at the money 3 month out put options on the SPY ETF, or at the money 3 month out put options on the S&P 500 futures or even mini S&P 500 futures? Or would it be exactly the same and is it just the underlying security that has more leverage with no consequences for the options?

Thanks a million! (that's leveraged...)

drftr
 
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Rhody Trader

Senior member
2,620 266
The question I have is why you're thinking about leverage. What does it matter if it's a question of hedging your portfolio?
 

drftr

Newbie
2 1
Thanks for replying John. I'd like to have the highest leverage possible for my "insurance", meaning that IF I really need it I can make up for a higher portion of my loss on equity. Of course if I don't need the hedge I will lose my insurance premium but I don't consider that a problem as it's part of the strategy. But IF I need the hedge than I'd like to get the highest return possible WITHOUT adding new risks which would be the case if I hedge through buying futures.

drftr
 

moka2

Established member
529 14
Thanks for replying John. I'd like to have the highest leverage possible for my "insurance", meaning that IF I really need it I can make up for a higher portion of my loss on equity. Of course if I don't need the hedge I will lose my insurance premium but I don't consider that a problem as it's part of the strategy. But IF I need the hedge than I'd like to get the highest return possible WITHOUT adding new risks which would be the case if I hedge through buying futures.

drftr
HI
SO you are looking for a cheaper married put
is it not better to hedge the underlying with a option on same underlying because then the broker will give you cross margin benefits !
SPY Long + SPY PUT (long) = direct risk management from broker's point of view
SPY Long + ES (futures) PUT (long) = indirect hedge!
The only way to find out is to find cost of the PUT with same exact strike and expiary on SPY and equal ES contracts on your platform of choice
 
 
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