This is not the whole story. The spread has to be taken into account SPY spreads can be just a few cents where SPX is closer to 30 cents which means you could be giving up $30 to exit the spx trade verses $10 to get out of SPY on a 10 lot. On TD commissions for example would be 13 round turn on a 10 lot of SPY and 2.50 for a round turn on a 1 lot of SPX. If though you give up the 20 dollar difference due to the spread. The cost of SPX is actually 22.50 verses 23 for SPY (assuming you give up 1 penny at exit). I find though you can get out many times at the bid or mid and not even give up the penny which makes SPY cheaper.
Here in Canada they charge you $ 9.95 + $1 per contract , so if you buy 10 contracts you will pay a commission of $ 19.95 If you buy 15 contracts you will pay $24.95 .... and again you have to pay the same when you close the position. It is really too much
@@obetbal * "some brokerages" still have options fees To answer the question it's competition from the new discount brokerages, mostly Robinhood. Robinhood, M1 Finance and others all played a part in driving price to 0.
Clearly, this man doesn't understand how sensitive weekly SPY options contracts are. If SPY moves 0.20 cents then the price of the option will change dramatically. With your method SPY has to reach a certain price for it to be profitable in the dollar domination. (cents movement wouldn't do anything)
Summary: If you're going to SPY options at increments of 10, might as well just buy an SPX option to save you the commission costs since SPY is literally just price @ 1/10 SPX.
Thank you for making this video. I don't have this problem yet, as I need to keep my size small for now, until my account grows. But I'll keep it in mind for the future.
Great question, Trend. The answer is that the spreads are definitely wider on SPX options because the underlying index is so large. However, execution is generally excellent in $SPX options and so getting filled at the mid is, in my experience, common if not the norm. Thus the spread is not particularly relevant to the actual fills that you get.
Very good video but you did not mention the .53 (per contract/per side) fee you are charged by retail brokers by the exchange for the privilege of trading SPX options which is separate from your brokers commissions and fees. So whether you are paying .15 a contract or .50 per contract per side this still has to be added in. Once again thx for the video SMB always does an excellent job with all of its content.
@@chrisf1176 I do not know about IB but it is so with Etrade and the Broker said it was an industry wide charge/fee for at least retail brokers firms. So you can check with customer service or read the fine print in the rates and fees section of your account.
Nicole, I don't want to be seen endorsing any one broker. We are agnostic on that. I'd say the major online brokers that are used by most options income traders are: TD Ameritrade/Think or Swim, Interactive Brokers and Tastyworks.
Ok I paper traded 5 contracts of SPX on TOS and fees appear to have been just $10? That don’t add up with TD’s default fee structure even but I noticed this trading high priced options weren’t’ killing me like 100 contracts of SPY at nearly $200 RT, 10-15 contracts of something else would make the same profit less the crazy per contract commissions. I’m up $100k finally after a few months and TD got another $72 friggin k that mostly would have been mine too had i just traded SPX. Anyway, great explanation and made clear some other things too.
Another great video Seth. Just when I think I have options figured out, a simple version comes along. Your version would double the savings per year if all things were equal. I qualify for E*Trade discount from 65 cents to 50 cents per contract. I thought I had figured out a way to save about 8k a year on fees from the SPY trades by moving my 3 long positions out 6 weeks and I make daily trades with my short positions. Your plan would make it easier to use to go back to a daily trade on a weekly expiration for a lot less cost and risk. Another thing I did not calculate in the savings is the interest if I use my margin account for a trade and I have to hold for several days.
Maybe this was a very theoretical example, but I have to ask, why would anyone make a $1 max loss on a long trade? That put is going to be expensive as hell and you would loose much more than the $1 protection your buying. If your holding the position for a long time, just sell a call? The delta would also be .5 most likely, if your on a shorter time frame, so you need 2x options. If folks want to learn how to trade options, spend the good time and learn them right. No crash course would do justice. Do the crash course (TD’s free online course is very good) and buy and read Options as a strategic investment, read dynamic hedging also. If you don’t understand the math, maybe try a crash course in the math topics on Khan Academy. You won’t learn options by pure trial and error. Options are a great skill to have, and help you gain a new perspective. It would take you probably a year to get through the books and have a solid understanding, but worth it.
But you get terrible fills, slow execution, and there was more than one instance where people couldnt close positions and lost hundreds of thousands of dollars. You get what you pay for.
LK Raw, yes of course the point of this video applies if you'd otherwise be buying ten spy options. But as your account grows, this will come into play.
@@sethfreudberg4750 I really enjoy your content. You are the reason I have begun studying the options market. The idea of collecting time premium through credit spreads was really ground breaking stuff for me. Maybe one day I'll be SMB material.
@@wyatthale555 Keep working hard at growing as a trader and maybe you will be! Try optionsclass.com to register for a further two hour webinar on the topic.
The video starts at 3:10 !
Love my g
Dang it, never thought of that, obviously you have to trade more than 10 contracts to make buying SPX options worthwhile.
That is true.
This is not the whole story. The spread has to be taken into account SPY spreads can be just a few cents where SPX is closer to 30 cents which means you could be giving up $30 to exit the spx trade verses $10 to get out of SPY on a 10 lot. On TD commissions for example would be 13 round turn on a 10 lot of SPY and 2.50 for a round turn on a 1 lot of SPX. If though you give up the 20 dollar difference due to the spread. The cost of SPX is actually 22.50 verses 23 for SPY (assuming you give up 1 penny at exit). I find though you can get out many times at the bid or mid and not even give up the penny which makes SPY cheaper.
Most brokers are commission-free now. Is this video still relevant ?
options trading still do have fees
Obet Bal no they don’t
Here in Canada they charge you $ 9.95 + $1 per contract , so if you buy 10 contracts you will pay a commission of
$ 19.95
If you buy 15 contracts you will pay $24.95 .... and again you have to pay the same when you close the position. It is really too much
@@obetbal * "some brokerages" still have options fees
To answer the question it's competition from the new discount brokerages, mostly Robinhood. Robinhood, M1 Finance and others all played a part in driving price to 0.
Clearly, this man doesn't understand how sensitive weekly SPY options contracts are.
If SPY moves 0.20 cents then the price of the option will change dramatically.
With your method SPY has to reach a certain price for it to be profitable in the dollar domination. (cents movement wouldn't do anything)
What if you can only afford 1 SPX option? How to scale out, I think it would make you afraid too hold too long
I do feel like SPX is more intimidating and definitely not for the smaller accounts.
Summary: If you're going to SPY options at increments of 10, might as well just buy an SPX option to save you the commission costs since SPY is literally just price @ 1/10 SPX.
Thank you for making this video. I don't have this problem yet, as I need to keep my size small for now, until my account grows. But I'll keep it in mind for the future.
Are the spreads on SPX options similar to spy? I know that the bids and asks are usually pretty close on spy.
Great question, Trend. The answer is that the spreads are definitely wider on SPX options because the underlying index is so large. However, execution is generally excellent in $SPX options and so getting filled at the mid is, in my experience, common if not the norm. Thus the spread is not particularly relevant to the actual fills that you get.
@@sethfreudberg4750 market orders or limit orders? thanks
Wow. I will be making this change next week to swap my spy puts to Spx. Thanks. Such great simple practical information
Very good video but you did not mention the .53 (per contract/per side) fee you are charged by retail brokers by the exchange for the privilege of trading SPX options which is separate from your brokers commissions and fees. So whether you are paying .15 a contract or .50 per contract per side this still has to be added in. Once again thx for the video SMB always does an excellent job with all of its content.
Even IB? I don’t think they charge this fee, but I realized I was getting dinged by this in my Tastyworks account.
@@chrisf1176 I do not know about IB but it is so with Etrade and the Broker said it was an industry wide charge/fee for at least retail brokers firms. So you can check with customer service or read the fine print in the rates and fees section of your account.
@@chrisf1176 They do, Chris, all brokers do--either by embedding them in your SPX options commissions or charging them separately as exchange fees.
Great Vid!
hahahaa feel so stupid now but thank you for the lesson
Glad to help!
Thanks, this was really grateful. Do you recommend any particular broker to trade options?
Nicole, I don't want to be seen endorsing any one broker. We are agnostic on that. I'd say the major online brokers that are used by most options income traders are: TD Ameritrade/Think or Swim, Interactive Brokers and Tastyworks.
don't apologize to the brokers they make hand and fist full of cash on commissions
lol good point, Justin, I take that apology back :)
Ok I paper traded 5 contracts of SPX on TOS and fees appear to have been just $10? That don’t add up with TD’s default fee structure even but I noticed this trading high priced options weren’t’ killing me like 100 contracts of SPY at nearly $200 RT, 10-15 contracts of something else would make the same profit less the crazy per contract commissions. I’m up $100k finally after a few months and TD got another $72 friggin k that mostly would have been mine too had i just traded SPX. Anyway, great explanation and made clear some other things too.
Robinhood
So now you'll get to keep MOST of the profit :)
Great information and explanation, there is something to learn, thanks
Thanks Santos!
Another great video Seth. Just when I think I have options figured out, a simple version comes along. Your version would double the savings per year if all things were equal.
I qualify for E*Trade discount from 65 cents to 50 cents per contract. I thought I had figured out a way to save about 8k a year on fees from the SPY trades by moving my 3 long positions out 6 weeks and I make daily trades with my short positions. Your plan would make it easier to use to go back to a daily trade on a weekly expiration for a lot less cost and risk.
Another thing I did not calculate in the savings is the interest if I use my margin account for a trade and I have to hold for several days.
the dislikes must be 18 angry brokers
Maybe this was a very theoretical example, but I have to ask, why would anyone make a $1 max loss on a long trade? That put is going to be expensive as hell and you would loose much more than the $1 protection your buying. If your holding the position for a long time, just sell a call? The delta would also be .5 most likely, if your on a shorter time frame, so you need 2x options.
If folks want to learn how to trade options, spend the good time and learn them right. No crash course would do justice. Do the crash course (TD’s free online course is very good) and buy and read Options as a strategic investment, read dynamic hedging also. If you don’t understand the math, maybe try a crash course in the math topics on Khan Academy. You won’t learn options by pure trial and error.
Options are a great skill to have, and help you gain a new perspective. It would take you probably a year to get through the books and have a solid understanding, but worth it.
Not to mention the tax breaks you get from trading spx over spy
No commissions on Robinhood #spy300gang #wallstreetbets
But you get terrible fills, slow execution, and there was more than one instance where people couldnt close positions and lost hundreds of thousands of dollars. You get what you pay for.
@@JohnSmith-zs1bf it KILLS positions when you can't close a trade UNTIL end of the day and at whatever price...
Im trading for 2 years and I dont get this for a meter. And yes, I lose money.
For those rich people that buy atleast 10 spy options.. im poor. Then again maybe the micros is a better option for me🤔
LK Raw, yes of course the point of this video applies if you'd otherwise be buying ten spy options. But as your account grows, this will come into play.
You hit me between the eyes with the SPY Puts. I am guilty dammit.
lol, don't worry, the greatest day traders I know fall into the same trap.
@@sethfreudberg4750 I really enjoy your content. You are the reason I have begun studying the options market. The idea of collecting time premium through credit spreads was really ground breaking stuff for me. Maybe one day I'll be SMB material.
@@wyatthale555 Keep working hard at growing as a trader and maybe you will be! Try optionsclass.com to register for a further two hour webinar on the topic.
Great video. 👌🏻
Thank you!
um...this is no secret. 🙄
STUPID COINDCX -0. 5% /BINANCE -0. 1%/0.2% HOUBI - INTRADAY TRADING WITHOUT COVER BRACKET ORDER (2) I DON'T USE SL LIMIT SL MARKET ORDER