Good instruments to use for options on S&P500 and DJIA indexes?
What are some good (largest popular) instruments/ETFs to use when buying options on the S&P500 and DJIA?
By good I mean have very good liquidity, even when buying/selling further from the money, and hence ideally smaller spreads.
I don't know what is available for DJIA and only know of one, SPY, for S&P500. I haven't looked into this whole subject at all, so all answers/comments are appreciated. Thanks.
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Well, the largest, in terms of both volume and unfortunately, contact size is the options on the S&P futures index. It's based on one contract which is 0 times the current S&P index, or just over 0K current value. This does not make for too cheap an option cost, but it's definitely the largest as you requested.
For the average Joe, or Ray, in this case, the most popular ETFs are SPY and DIA for the S&P and Dow Jones, respectively. These are reasonably sized so their options are within range of your goal. See the SPY options at Yahoo. Then flip over to the DIA options.
(SPY reflects 1/10 the S&P so an option contract, on 100 SPY shares is effectively on 10 times the S&P index or 1/25 the futures option pricing.)
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