Trading Etf Options Liquidity

Forex trading is the simultaneous buying of a particular currency and selling another. Currencies are traded through a factor or dealer, and are traded in pairs; for example the euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY).

Imagine all pairs constantly in a ‘tug of war’ with each currency on its own side of the rope. Exchange rates change based on which currency is stronger at the moment.

Exchange-traded funds (ETFs) have enabled investors to quickly and easily capitalize on opportunities around the world. Stock options can help enhance these strategies by effectively controlling upside potential and downside risk. In this article, we’ll explore one such strategy that can help limit downside risk during times of uncertainty without any added expense [see 101 ETF Lessons Every Financial Advisor Should Learn]. Suppose you’ve just purchased the S&P 500 SPDR (SPY, A) with a specific price target and stop loss in …


The following currency pairs are referred to as the ‘majors’. These pairs all contain the U.S. dollar (USD) on one side and represent the most often traded. The majors are the most liquid and most traded currency pairs in the world: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD.

Definitely things to be considered.

Currency pairs that do not include the U.S. dollar (USD) are known as cross-currency pairs or simply the ‘crosses. ‘ Major crosses are likewise known as ‘minors. ‘ The most actively traded crosses contain the three primary non-USD currencies: EUR, JPY, and GBP.

Are there options on ETFs and leveraged ETFs?
Is the liquidity good for these options? What about the liquidity for options on futures?

  • It depends on the ETF. Some have options, other ETF's do not have options. There are many ETF's that are leveraged for both the bull and the bear trading.

  • Do you know how to look this up yourself? Go to yahoo, type in the symbol in the get quotes window, click on the options tab. Then you get bid-ask, volume, open interest on any option. You won't have to ask on YA whether something is liquid! Futures options are all over the map. Many futures options are wildly liquid (ATM Eurodollar or S&P for instance). Some are not liquid at all (0.1 delta call on milk futures).

  • There are internally leveraged ETFs. Like ETFX (FTSE100 leveraged 2x)) and many more. Not so sure if there are options on ETFs. Defeats the object really. ETFs are , or should be 1:1 trackers of the underlying.


  • If you want to trade with an IRA or 401k account, once you exit a trade, you will not have to await the trade to settle before you can then use that same funds for the next trade. One second after you exit your current trade, that same money is provided to you for another trade. With stock trading, once you exit a trade, you may wait as long as 3 days for your money to settle before you can then use that money to trade with again.

    Because we’re trading Futures, rules that were originally intended for commodity trades also apply to E-mini Futures trades. There is a 60/40 split on taxes: 60 per cent of your trade is considered long term (15% tax bracket) and 40 per cent of your trade is considered short term (28% tax bracket). Compare this to stocks. If you hold stock less than a year, it is seen as a short term trade. You must hold the stock for longer than a year in order to be eligible for long term capital gains. With Futures, all your trading is broken down by the 60/40 rule, even if your average trade is 2 minutes.

    At year end, you will receive a 1099-B statement from your Futures broker, with only 1 figure, a net number of all your trading, not each individual trade. If you profited by $50, 000, the 1099-b only shows $50, 000. You can now claim $30, $20, 000, and 000 as long term capital gains as short term, the 60/40 split.

    When doing your taxes at year end, it becomes a much easier task. You only need to make 1 entry on your return. If you’re trading stocks, you need to itemize each and every trade you made. If you’re a daytrader and trade many stocks, you will need hours and hours to enter all your trades. You are made in a minute with Futures trading.

    Futures trade virtually 24/6. The only day you cannot trade Futures is Saturday. Many stocks don’t trade off hours, and if they do, it is very light trading. The S&P 500 e-mini is traded all over the world. We can see heavy trading on the e-mini depending upon the time of day. For example, at 2:00am EST, the Japanese trade the e-mini. At 5:00am EST, the Europeans trade the e-mini. If you have insomnia or cats that get you up in the midst of the night to go out, e-mini trading is definitely for you.

    Each Futures Contract is traded on only 1 exchange/1 book….the CME. Stocks, however, can trade across different exchanges, each exchange having different Bid/Ask prices. E-mini Futures contracts have just one price-the CME price. Large NYSE cap stocks trade on multiple exchanges, each exchange can post a different price.

    The following are considered Yen crosses because they use the Japanese Yen on one side: EUR/JPY, GBP/JPY, CHF/JPY, CAD/JPY, AUD/JPY, and NZD/JPY.

    Just like Europe, Great Britain has their own crosses as well: GBP/CHF, GBP/AUD, GBP/CAD, and GBP/NZD.

    And here are some other currency pairs that are considered minors: AUD/CHF, AUD/CAD, AUD/NZD, CAD/CHF, NZD/CHF, and NZD/CAD.

    Exotic pairs are composed of one major currency connected with the currency of an emerging economy, such as Brazil, Mexico, or Hungary. Here are a few examples of the exotic currency pairs: USD/HKD, USD/SGD, USD/ZAR, USD/THB, USD/MXN, USD/DKK, USD/SEK, and USD/NOK.

    It is not uncommon to have spreads that are two or three times greater than that of EUR/USD or USD/JPY. So if you wish to trade exotics pairs, remember to review this in your decision.

    Because the foreign exchange market is so extraordinary, traders came forward with a few different methods to invest in currencies. Of these, the most common ones are forex spot market, options, exchange, and futures-traded funds (or ETFs).

    In the spot market, currencies are traded immediately or ‘on the spot,’ using the current market price. What are so amazing about this market are its small spreads, and 24 hour operations. It’s extremely easy to take part in this market since accounts can be opened with as little as a $25 investment! And most brokers ordinarily provide news, charts, and other information for free.

    Futures are contracts to buy or sell a particular asset at a particular fee on a date in the future. That’s why they are called futures! Forex futures were designed by the Chicago Mercantile Exchange (CME) a long time ago in 1972. Since futures contracts have certain standards and are traded through a centralized exchange, the market is extremely transparent and well-regulated. This means that the price and transaction details are easily available.

    An ‘option’ is a financing instrument that gives the buyer the ability, or the option, but not the obligation, to purchase or sell an investment at a specified price on the option’s completion date. If a trader ‘sold’ an option, then he or she would be glad to order or sell an asset at a specific fee at the end date.

    Just like futures, options are also traded on an exchange, such as the Chicago Board Options Exchange, the International Securities Exchange, or the Philadelphia Stock Exchange. But, the disadvantage in trading forex options is that market hours are limited for particular options and the liquidity isn’t nearly as great as the futures or spot market.

    Exchange-traded funds or ETFs are the newest states of the foreign exchange market. An ETF could contain a set of stocks in conjunction with some currencies, allowing the dealer to diversify with other assets. These are produced by financial institutions and can be traded like stocks through an exchange. The restriction in trading ETFs is that the market is not accessible for all hours, like forex options. Also, since ETFs contain stocks, these are subject to trading commissions and additional transaction fees.