Spreadbetting/CFD Equity Index Options Trading

[Pi3141]

Hi everyone,

I'm interested in trading Index Options (not Binary Betting/Options) and I know that IG Index and City Index offer those options on their spreadbetting/CFD platforms.

However, I was wondering if anyone could tell me how/where the prices for these options are based? - Is there some underlying options market that these prices are derived from? Or is it completely made up by the spreadbetting company (like in the case of binary betting/options).

Thanks in advance

 

[BobbyBB]

The market they offer you will be based on the LIFFE option prices plus the spread betters spread and that means they're not going to offer good value unless the option moves a considerable amount, ie you pay 20 and cover at 80+ (or the other way around).

However, if you're looking to pay say 20 and knock them out at 30 then it's going to be very hard to make money overtime as they spread will eat your account alive (fast or slow, it's the same result).

 

[Pi3141]

Thanks for the info!

One further question if I may, where can one get real time data for LIFFE option prices?

Thanks

 

[capitalspreads]

Pi3141

this is data that you cannot get for free. If you go to a data vendor (reuters/bloomberg/morning star) you will be able to ask prices. as a private client it is not that expensive but not that cheap either.

If you sign up as a client of a futures broker you can get the info but desk fees tend to rack up.

simon

 

[SpreadBeta]

Pi3141,

Strangely enough I was looking into where to get FTSE100 Index Options Data only last week (and asked a similar question in the Options Forum, but have had no answers to date)

Anyway, What I found so far is the following, if it is helpful :

Latest live prices for the various months can be found here : https://globalderivatives.nyx.com/en/contract/content/29108/settlement-prices?

I contacted the LIFFE Investor helpline and found that :
The FTSE 100 Index Options is part of their Index Derivatives package and can’t be bought per instrument/ISIN code. The package contains :

FTSE 100 Index Futures
FTSE 250 Index Futures
FTSE Eurotop 100 Index Futures
FTSEurofirst 80 Index Futures (Paris)
FTSEurofirst 100 Index Futures (Paris)
FTSE 100 Dividend Index Futures
FTSE 100 Total Return Index Futures
MSCI Euro Index Futures
MSCI Pan-Euro Index Futures
TOPIX Index Futures
CAC 40 Index Futures
CAC 40 Dividend Index Futures
AEX Index® Futures
AEX Dividend Index Futures
BEL 20 Index Futures
PSI 20 Futures
FTSE 100 Index Options (European- Style)
CAC 40 Index Options (PXA)
CAC 40 Index Options (PXL)
AEX Index® Options
AEX Index® Weekly Options
BEL 20 Index Options
London Stock Options
Paris Stock Options
Amsterdam Stock Options
Brussels Stock Options
USFs (Portugal)
USFs (Denmark, Finland, Norway)
USFs (US)
USFs (Cash Settlement)
USFs (Italy)
Underlyings for Amsterdam Individual Equity Options

They said that the service can be delivered via End of Day (what I was looking for). The first 12 months costs 12 x Euro 100 = Euro. As per the 13th month a discount is being granted for historical data. The costs will be Euro 100 for ongoing monthly subscriptions. No discounts!!. Not sure if you can start the contract for 1 month, download the history you need then cancel future months..

Seperately I found that you can get the last 10 days EOD prices in a series of daily downloads here : http://www.liffe.com//reports/eod?item=Histories ("London Index Options" CSV is what I am looking at, and the Archived files section)

An example file, that the links on the page will take you to) can be found here : http://www.liffe.com/data/ds130204io.csv

As you can see YYMMDD is part of the filename, which means you can get directly to any data file in the past 30 months just by enetering the corret address so e.g. 15th March 2010 file can be accessed via URL :
http://www.liffe.com/data/ds100315io.csv

Downloading these manually can be a pain so I use the WGET utility (downloadable from here) : Wget for Windows

In which case you can download a series of files from the command line / via a batch script using the following type of commands :
wget -N http://www.liffe.com/data/ds130101io.csv
wget -N http://www.liffe.com/data/ds130102io.csv
wget -N http://www.liffe.com/data/ds130103io.csv
wget -N http://www.liffe.com/data/ds130104io.csv
etc...

Hope the above helps....let us know if you find any other info (from any other vendor etc..)

 

[Pi3141]

Thanks to BobbyBB, Simon and Spreadbeta for your responses, it's good to see knowledgeable people like yourselves sharing information with us noobs.

I should say that I asked the question because I'm principally interested in knowing just how much of a spread the spreadbetting companies add onto the bid/ask option prices and if the spread varies during times of volatility or if its fixed. So, thanks to all for the info provided, I shall check it out.

Simon, you mentioned in some other threads that Capital Spreads will not be adding an options market for customers in the short to medium term. May I ask for your opinion about the general viability of the options market for the masses? Do you think it is/will be a worthwhile venture to eventually pursue? - Because your competitors, IG Index, City Index and Spreadex (although Spreadex are relatively small in comparison to Capital Spreads I think) currently offer options for customers, so maybe they know something you don't perhaps?

Thanks

 

[hacks]

ETX Capital also offer spreadbetting Options on Indices.

 

[capitalspreads]

pi3141

Actually I do know rather a lot about options as i was originally a swaptions/caps/floors/swaps trader for several of the major banks. And built one of the original surface models used in derivatives pricing.

I also built the equity index options pricing/risk platform for Cantor Index and had some influence over some of the others you mention.

I am a little agnostic about options for general clients as I personally feel that they are not something that the ordinary retail client should be trading in. This is just a personal opinion and not a professional one.

Capital Spreads does not do options for one reason. We operate a stop policy on all client positions. The stop is related to the clients available funds on his account (or the funds that the client has allocated to that individual position). The problem with options is that there is frequently no absolute price on any exchange for many strike prices and so the prices put up by most SB companies are derived from Volatility curves/wing bias/phases of the moon etc etc... If a client of ours gets stopped out of a position we must be able to prove that the market quote reflected the price that we quote to the clients. In many cases this would be very difficult with options.

We do not do 'margin calls' or 'waived margin' that our competitors who quote options do... we like our clients (generally) knowing roughly what their max risk is when they take out a position as it protects both them and us.

In reality (i hate to say) over 90% of retail client sell options and so the online options pricing from many of the SB companies reflects this. i.e if the price of the Feb 6300 put on liffe is 50-52.5 the spread bet price will probably be 48-51 (because they know that nearly all clients sell). Not only this but options prices in general (even on the exchanges) are truly awful. As mentioned the front month Feb ATM (6300) put price is currently 50-52.5 on LIFFE ... if you consider that this is a delta of 50% this is the equivalent of a 5 point wide price in the actual underlying future. This means that any 'taker' of options (i.e any client of a market maker) would struggle in the long run to beat the odds.

Of course on this note Capital Spreads should be quoting options as they can be used as a very good hedging tool as clients will always be net sellers of premium and so we could just leave the options book as our hedge against other client positions. And as mentioned the net effect is to have hedged at 5 points better than going into the futures market... although you would have to keep an eye on theta

Eventually we will get round to them but for the moment we have other products which we are building

simon

 

[tar]

good tools here

QuikStrike Options Valuation Tool ? CME Group

 

[tar]

prices

CME DataSuite - Free real time quotes & market information

 

[instant]

Tar . Thanks for pointing out this site it is very useful for information.

The CME prices say that they are just 5 secs delayed but looking at the Emini Mar Future on the S&P (ESH3) i would say that they are a lot more than this on occasion. I was watching for a while and it was more than a minute old at times and sometimes did not seem to update at all. It appears to be quite a clever piece of kit in that the price delay appears to be variable.

But for general Options information it is quite useful, actually better than that, as it gives a good view of where the volumes and volatility (if you have a vol calculator) are which is very important if you want to try to ensure good liquidity when you get out as well as when you get in.

 

[airmark]

pi3141
In reality (i hate to say) over 90% of retail client sell options and so the online options pricing from many of the SB companies reflects this. i.e if the price of the Feb 6300 put on liffe is 50-52.5 the spread bet price will probably be 48-51 (because they know that nearly all clients sell).

This is very interesting. I'm quite surprised to hear actually. I would imagine that retail traders would be net buyers of options (as a directional punt) rather than net sellers (for collecting decay).