This post was originally written on April 20, 2015 at http://blog.optiontiger.com/trading-the-spx/
Trading the SPX Index
If you like trading the SPX Index, then you know there are many ways to do it. But there are ways you could be trading the SPX Index with leverage which you may not be aware of.
- The first is trading the SPX Index options itself. There is no leverage here. The SPX is a large Index and has wide Bid Ask spreads.
- SPY ETF. Great ETF, 1/10th the size of the SPX, this is the most liquid ETF in the markets with a 1 cent Bid-Ask. But you have to buy large quantities. And there's no leverage.
- SSO and SDS. These ETF's have a 2X leverage on the SPY. Not bad. Decent liquidity with about a 5-cent Bid-Ask spread. Definitely acceptable.
What if you want more leverage than that ??
Up until now, you did not have much options. Well, it seems like two instruments have come up recently - the SPXL and the SPXS. As the names might suggest, the SPXL is a Long-instrument (3X leverage of the SPX), and the SPXS is a short version (also 3X leverage.)
I've been watching these for some time, and they are interesting. But they are still new, so liquidity needs to come into these instruments.
Check out this video I made on these two instruments. BOTH HAVE 3X leverage, but the price of the stocks is reasonable, so the Option prices are also reasonable.
Do you have any thoughts on the SPXL and the SPXS ??
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.