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Hi Symple! thanks for the reply. I think we are both scratching at the same thing, a matter of nomenclature I think.
By neutralizing the directionality I am referring to the entire position, the combo of one long future and one long put, or one short future and one long call.
there are many ways to trade collars in equities so I won't split hairs there. you did answer my question more or less by saying to keep a 1 to 1 ratio futures to options.
I will rattle on however for the sake of tapping into the brain trust of this fantastic community and gathering more educational resources.
With equities, options contracts refer to the right to buy or sell 100 shares at expiration. when an equity option is exercised 100 shares change hands.
With futures options the options contract itself varies from product to product. ES vs NQ options have different "multipliers" for lack of a better word, and this makes some sense to me because of the built in leverage that comes with futures initial margin requirements. like when an ES option contract settles approximately 5 futures contracts change hands (or sometimes settles to cash?), whereas NQ 2 futures change hands on expiry. I guess I am unfamiliar with each futures ticker expiry framework and multiplier schema for options, and I am curious how the directional exposure actually works out when you have a 1 to 1 type futures options combo position.
I guess to illustrate my confusion a bit I will use an example in equities terms, if you have 1 share of AAPL, and you buy a -50 delta at the money put, your overall position delta would be -49 deltas. one delta one share, easy. This is not a real strategy, no one would do this.
What is the delta of one long future? when the multiplier varies from product to product and the notional is so much different than the cash you put up. I will probably make some paper trades to learn more about trading this way, but any links to articles or videos on learning these concepts would be much appreciated.
When I press the "Thanks bottom", it means that I have read and accepted your posting with your questions. My answer, even in form of questioning you to have a feedback that you understood what I and we talk about, will come, usually once a day per posting and questioning in this thread like in any other one. If it takes a bit longer, so it will be.
Doing such topics only on the net, is not always easy and needs clarifications from both sides to be sure to speak about the same topic. Until the next round, in case no body else wants to talk about this topic in dept.
There is still one question/statement from your side open. If you want to talk about it just move on and I will not be shy to give you at least an answer.
In my experience the best learning comes from trying something for real (with responsible risk).
I am starting to dabble in some futures options trading this past week, just using strategies I employ in equities i.e. Iron Condors and short strangles.
I am already noticing the capital efficiency for defined risk trades, the credit received to buying power reserved.
I am going to take some time and go through the links you have sent, and I do appreciate your time to address my questions.
One challenge I foresee with futures options trading consistently is liquidity.. Generally There is a huge advantage for options traders when there are tight bid ask spreads and it is easy to roll and exit trades when prudent, products like Tesla and Apple for example.
Which Futures products have the most liquid options markets in your experience?
If you are open to talking your book, what options strategies do you employ in your trading? Mostly Synthetics?