I often get asked by members which are better to trade, Indexes or ETFs. “Should I trade SPY or SPX, IWM or RUT, QQQQ or MNX?”

The answer is, it depends. But I do have my preferences.

Liquidity

Both ETFs and Indexes are very liquid.  As I write this the At The Money Call in  SPX has an open interest of 45,000 contracts. The SPY At The Money Call has an open interest of 85,000 contracts. So both are very liquid. Major hedge funds though trade the indexes because they trade directly with the market makers.

Advantage: Even

Commissions

Commissions play a role because the SPX is ten times larger than the SPY. So if you want to trade $1,000 credit spread, you can do it with a 1 contract spread in SPX or a 10 contract spread in SPY. If you are paying per contract, the commission to trade SPY is ten times larger. if you [...]

The last couple free trades, PCLN and OIH worked out nicely. Good gains in both. So here is another one.

IWM

Sell May 65 Puts, Buy May 63 Puts for a credit of .28 each spread. Get out if you are down 10-15% of the margin. if it goes well, either let it expire or buy it back at .05. I prefer to buy it back because it is 45 days from expiration. Normally you do not want to sell cedit spreads with this much time but with the volatility so low, either you move closer to the money or you go out farther in time to get a decent return.

This trade has a potential profit of 16%. This is an interesting trade because IWM is the etf for the Russell 200 index. Earnings season is coming up and that will affect IWM. Also IWM is at a 52 week high. How [...]

The results are in.

For October 2009, OptionGenius.com was  + 2.72%.

Not very impressive is it. But the S&P was down -1.98%.

Trade #4 for the month was rolled forward to November. If I had not rolled it, it would have expired worthless and with a profit. Instead it is now  November Trade #3.

Both iron condors did great in October. I took a more conservative stance this month because of October usually being a very bad month for the markets. And this one did not disappoint.

It started out smooth, then dropped towrdas the end of the month, then reversed and rallied up just as fast as it had dropped.

Can you saw “whipsaw?”

But  both condors did great with no adjustments required. What really hurt was an IWM butterfly that busted my chops. If I had just put that trade on and forgot about it, it would have been profitable, but alas, that’s not [...]