Looking for clarity on selling options regarding different S&P related assets (particularly in the lens of Portfolio Margin) . So far, I have identified the following:
\- SPY
\- Good liquidity
\- American style
\- NOT 1256 tax advantaged
\- SPX
\- Higher notional value (10x of SPY), thus higher BP
\- Good liquidity
\- European style
\- 1256 tax advantaged
\- XSP
\- Same notional as SPY (more or less I think there is some tracking error?)
\- Not as good liquidity (compared to SPY or SPX)
\- European style
\- 1256 tax advantaged
\- /ES futures
\- SPAN system
\- Good-ish liquidity?
\- 1256 tax advantaged
\- Euro vs American?
\- Term structure implications?
Seems like XSP or SPY is preferred for smaller accounts (depending if tax or liquidity is preferred? Probably strategy dependent as well…). Once an account is big enough, then SPX or /ES?
# Edit: After some more research, I believe the following to be true as well
\- SPX / SPY / XSP
\- OCC TIMS is “linearly” scaling in the event of blown out strikes (e.g. big crash on a CSP)
\- More predictable tail risk monitoring
\- Standard market hours
\- Not necessarily less prone to margin calls, but definitely more avoidable due to calculations?
\- /ES
\- SPAN is exponentially scaling in the event of a blown out strike
\- Less predictable calculations for tail risk monitoring
\- Better capital efficiency (compared to above)?
\- 23/5 hours of operation (can adjust during Asian and Euro sessions)
\- Margin call risk is higher (due to sudden macro events and/or exponential scaling mentioned above)