Options on EU-domiciled ETFs

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Topic Author
KohPhiPhi
Posts: 5
Joined: Fri Jan 29, 2021 11:02 pm

Options on EU-domiciled ETFs

Post by KohPhiPhi »

Hey Bogleheads, EU citizen here!

I am a heavy user of options. More specifically, I use them to gain long exposure to a market (via call LEAPs) and to hedge risk when necessary (via Collars).

When trading major US-domiciled ETFs, finding liquidity and acceptable bid/ask spreads is rarely an issue. However, I wonder how those might be for their European counterparts. Any feedback please?

Thank you so much in advance!
rhe
Posts: 118
Joined: Sun Feb 26, 2017 2:10 am

Re: Options on EU-domiciled ETFs

Post by rhe »

This is obviously location specific, but for many countries the location of your derivative trades wouldn't matter for tax purposes. I generally use Irish-domiciled ETFs, but I'm happy to trade futures on the US market. Have you double checked to make sure there is no way you can just trade on the US market? If it is a hedging trade all you would need is to find a US equivalent to the EU-domiciled ETF you actually hold.
Topic Author
KohPhiPhi
Posts: 5
Joined: Fri Jan 29, 2021 11:02 pm

Re: Options on EU-domiciled ETFs

Post by KohPhiPhi »

rhe wrote: Sat Jun 19, 2021 8:51 am Have you double checked to make sure there is no way you can just trade on the US market? If it is a hedging trade all you would need is to find a US equivalent to the EU-domiciled ETF you actually hold.
Thank you for your response.

For different reasons, I am only interested in trading options on EU-domiciled ETFs. That is why I wonder about their liquidity and spreads.
Topic Author
KohPhiPhi
Posts: 5
Joined: Fri Jan 29, 2021 11:02 pm

Re: Options on EU-domiciled ETFs

Post by KohPhiPhi »

BUMP: Does anyone here trade options on Euro-domiciled ETFs to share any feedback on liquidity and spreads?
rhe
Posts: 118
Joined: Sun Feb 26, 2017 2:10 am

Re: Options on EU-domiciled ETFs

Post by rhe »

KohPhiPhi wrote: Sat Jun 19, 2021 9:05 am
rhe wrote: Sat Jun 19, 2021 8:51 am Have you double checked to make sure there is no way you can just trade on the US market? If it is a hedging trade all you would need is to find a US equivalent to the EU-domiciled ETF you actually hold.
Thank you for your response.

For different reasons, I am only interested in trading options on EU-domiciled ETFs. That is why I wonder about their liquidity and spreads.
The vague way you've phrased your answer makes me think that you have discovered some sort of market inefficiency, and are hoping to develop a profitable trading strategy off of it. In my (limited) experience most market inefficiencies are non-tradable, which is precisely why they continue to exist!

If you can be more specific about exactly what you're trying to do, we are more likely to be able to offer helpful suggestions.
Topic Author
KohPhiPhi
Posts: 5
Joined: Fri Jan 29, 2021 11:02 pm

Re: Options on EU-domiciled ETFs

Post by KohPhiPhi »

rhe wrote: Thu Jun 24, 2021 1:39 am The vague way you've phrased your answer makes me think that you have discovered some sort of market inefficiency, and are hoping to develop a profitable trading strategy off of it. In my (limited) experience most market inefficiencies are non-tradable, which is precisely why they continue to exist!

If you can be more specific about exactly what you're trying to do, we are more likely to be able to offer helpful suggestions.
No market inneficiencies or opportunitic strategies here. Just good ole standard option positions (collars, spreads, iron condors, etc). However, for them to be efficient, liquidity and tight spreads are mandatory. I am just trying to get some insights on how liquid options on EU-domiciled ETFs are compared to the US-domiciled ones.

Does anyone in this forum trade options at all?
rhe
Posts: 118
Joined: Sun Feb 26, 2017 2:10 am

Re: Options on EU-domiciled ETFs

Post by rhe »

Ok, but an S&P 500 ETF that is domiciled in Europe is going to have identical behavior to an S&P 500 ETF that's domiciled in the US. In the absence of some special situation, you can just trade options using the US market.

I can speculate about some reasons why you might need to trade in Europe (regulations? time zones?), but there's no point in turning this into a game of 20 questions. If you tell us what your ultimate goal is, we might be able to help you. Why can't your strategy be implemented in the US?
Topic Author
KohPhiPhi
Posts: 5
Joined: Fri Jan 29, 2021 11:02 pm

Re: Options on EU-domiciled ETFs

Post by KohPhiPhi »

Rhe, I appreciate the willing to help, but I dont need help with the "strategy" or whether I could or couldnt trade US products. That is not what this thread this aiming for. I have a fairly good experience trading options on US products. I am now just trying to get an idea of how liquid options on EU products are compared to US products, that is all.

I really just need to discuss about liquidity on the European market. Lets please keep this thread around that topic. Thanks!
glorat
Posts: 905
Joined: Thu Apr 18, 2019 2:17 am

Re: Options on EU-domiciled ETFs

Post by glorat »

This thread is not going to be constructive due to https://xyproblem.info/

But I'll be generous and address the question directly. I think there is no point asking forum people what the bid/ask spreads are since they change all the time due to market conditions. Just open up the pricing on your broker pages. Interactive Brokers is typically the best and I can see everything there.
hi_there
Posts: 980
Joined: Sat Aug 29, 2020 7:00 pm

Re: Options on EU-domiciled ETFs

Post by hi_there »

My general understanding is that non-US options markets including EU are far less liquid, and there are also far fewer heavily traded ETFs. Among other things, this drives EU investors (and Asians) towards structured products or other derivatives like that. Are these too illiquid for your goals? You have to look at the screens yourself to decide.
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