Dave, SPY, S&P 500 futures or options?

 

Afternoon Dave,

I have a general question ( it’s about trades on the S&P 500 ): sometimes you recommend to go long or short the index via options or via SPY and sometimes via futures.

When you publish a recommendation to do it via futures ( like you did the day before yesterday ), you don’t recommend to do it through put options SPY too? Only through futures.  On the other hand, sometimes you give us few methods ( buy puts, sell call, sell futures )…

Regards

Gabi E. – Nes Ziona, Israel

Gabi,

A very good question and I can understand why it may be a bit confusing at times.

While making a directional call is challenging, sometimes determining the best way to express that forecast can also present some challenges.

For me, it always boils down to the reward vs the risk and how that forecast might likely play out.

For instance, my current forecast for higher levels in the S&P’s is being expressed via S&P 500 futures. You could, of course, use the SPY ETF as well. However, given the choppy nature of the S&P’s right now and the fact that we are in the middle of the summer doldrums, using options is much more difficult since you are dealing with time decay. Unless my bullish forecast happens soon, your options will simply bleed premium.  

In sum, whenever I suggest using the S&P futures, I will always refer to the corresponding price levels in SPY. When I use options (usually on SPY) I do not offer a futures or SPY alternative.

Hope that helps,

Dave

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