ES options, ES futures, /ES vs. ES

Michael B

Member
I'm trying to understand how /ES options work and the more I read the more confused I get.

Is there any difference between /ES and ES?

After having a chat with Interactive Brokers I thought I got it, but then I found this statement that makes it all confusing again: "ES options are not cash settled! ES futures are cash settled, but the options expire into an ES futures position if the option is in the money."

Could anyone please help?
Thank you,
Michael B
 
ES options expire into futures which are cash settled. It's an extra step with the options but the same result.
 
At expiration, ES futures are cashed out against settlement. If you bought the futures at 3098 or sold at 3100 and settlement is 3099 then you have a $50 profit. Any ITM options are converted to a futures contract and then settled the same way. If you bought a 3075 call for 23 or a 3125 put for 25, you would have the same profit.
 
Igi mentions various reasons why he prefers ES over SPX in his numerous presentations of the trade, cost of cary, margin ect.
 
i like /ES options for a few reasons, #1 - you can adjust your positions 24/5, which came in real helpful during FEB 2020. #2 - since it's 1/2 the size of SPX options [but 5X the SPY options], it's a nice way to leg in or out of trades w/o affecting your greeks too badly. however, the fees are a little steeper than SPX options
 
Top
Contact Us